Indian Indices Trade Marginally Higher; Telecom Sector Up 2.4%

Mon, 16 Oct 11:30 am | Monish Vora, TM Team

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After opening the day on a firm note, stock markets in India witnessed losses and are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the telecom sector and metal sector witnessing maximum buying interest. Banking stocks are trading in the red.

The BSE Sensex is trading up 100 points (up 0.3%) and the NSE Nifty is trading up 34 points (up 0.3%). The BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 64.75 to the US dollar.

Bharat Financial Inclusion share price is witnessing buying interest today. This comes as the company announced merger with IndusInd Bank this past weekend.

The merger is expected to improving return ratios by rationalizing the cost structure of the microfinance company.

In addition, the deal is essentially a short cut exposure to a banking licence for BFIL.

At the time of writing, Bharat Financial Inclusion share price was trading up by around 3%.

In the news from IPO space, Godrej Agrovet has made a stellar debut today after successfully concluding the initial public offer (IPO) last week.

The scrip of the company got listed at Rs 621 on Indian bourses today, a premium of 35% to its issue price of Rs 460.

The Rs 11.6 billion IPO was a huge hit and was oversubscribed over 95 times. The final issue price was fixed at Rs 460 per share, at the higher end of price band.

The portion meant for qualified institutional buyers (QIBs) was oversubscribed 151 times, non-institutional investors 236 times and retail investors 7.7 times.

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Godrej Agrovet Limited (GAVL) is a diversified, research and development focused agri-business company with operations across five verticals namely; animal feed (53%), crop protection (15%), oil palm (10%), dairy (20%), poultry and processed foods. The company is also the largest crude palm oil producer in India, in terms of market share as of March 31, 2017.

To know more about the company, you can read our IPO note on Godrej Agrovet Ltd (requires subscription).

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In the news from the telecom sector, the Cellular Operators Association of India (COAI) has favored a steep hike in international termination charges to Rs 3.5 a minute. This is against 53 paise per minute charged presently.

As per the news, COAI has argued there is a need to bridge the gap between blended termination rate paid by Indian operators for outgoing international calls and the termination rates received by them on international incoming calls.

Presently, the blended termination rate paid by Indian operators is around Rs 3.50 a minute for outgoing international calls compared to 53 paise per minute termination rate received by them on incoming international calls. This leaves Indian operators at a disadvantage as they pay more than what they receive for incoming international calls.

The Telecom Regulatory Authority of India (TRAI) is reviewing the above rates and is said to come out with a separate regulation on the international termination charges.

If implemented, the above move will benefit domestic telecom players. The move on the part of Indian telecom companies will also come close on the heels of TRAI decision to more than halve the domestic interconnect usage charge (IUC).

Note that the TRAI this month reduced the interconnect usage charge (IUC) from 14 paise per minute to 6 paise per minute. IUC are charges paid by operator companies for voice calls terminating from a different operator's network.

Furthermore, TRAI has proposed phasing out the IUC by 2020. This move is said to affect Indian telecom companies as India has one of the lowest IUC rates in the world, as can be seen from the chart below:

India has the Lowest Interconnect Usage Charge

The reduction will also mean big blow to some of the established domestic telecom players. As we wrote in a recent edition of The 5 Minute WrapUp...

• ...the IUC rate cut is expected to adversely impact established players like Bharti Airtel and Idea Cellular. What this means is that these companies would no longer be able to enjoy additional revenues from having a large subscriber base thereby impacting their profitability and debt servicing capability. At the same time this development would entail significant cost savings for entrant Reliance Jio.

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