Videsh Sanchar Nigam Limited (VSNL) has posted a 8% growth in bottomline during the quarter ended 30th June 2000. The company has suffered a decline in operating margins largely due to a 15% decline in total accounting rates. However a sharp rise in other income has limited the effect on the bottomline of the company.
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We have projected a full year profit figure of Rs 13.1 bn for VSNL, assuming a marginal growth of 1%. The sharp growth in other income is one reason why the company has performed better than anticipated. We have also been more aggressive on the depreciation front.
In coming months, the growth in its Internet business is likely to come under increasing pressure as Internet Service Providers (ISPs) look at setting up their own international data gateways. On the ISP front however the company continues to be a leader. Revenues from this segment, however form a very small portion of overall revenues (approx. 4% in FY00).
Topline growth has been hit by the reworking of the total accounting rates, which have ineffect reduced VSNL's share of revenues by 15%. The effect of this is likely to felt throughout the year on topline growth.
The stock currently trades at Rs 840, implying a P/e multiple of 5x.
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