Global Tele might fix 1:5 swap for GECS merger

NetScribes/Ganesh Ramamoorthy

The board of Global TeleSystems Limited might fix the swap ratio for GTL's merger with group company, Global Electronic Commerce Services, in favour of the parent company. The swap ratio is likely to be one share of GTL for every five shares of GECS, analysts feel.

"The final decision will be taken by the board of GTL on September 20, when it meets. But it will most likely be 1:5 in favour of GTL," a GTL official told NetScribes.

The GTL counter came under severe pressure at the bourses on Monday as operators resorted to profit-booking. The scrip closed 8.36 per cent lower at the National Stock Exchange and 6.68 per cent lower at the Bombay Stock Exchange.

The markets also seem to have completely discounted the news of the foreign institutional investor, T Roweprice, picking up 1.36 per cent or 5,88,000 shares in GTL, raising its stake to 8.79 per cent. "The news did not have any impact on the scrip. Whatever gains the scrip had made were quickly lost in afternoon trade due to heavy selling," a dealer said, adding, the scrip went on a tailspin mainly due to a general fall in the prices of most infotech stocks on Monday.

Opening from the previous close of Rs 1,587.90 at the BSE, the scrip hit a low of Rs 1,453 during afternoon trade before closing at Rs 1,481.90 - a loss of Rs 106 or 6.68 per cent. The counter clocked a total volume 4.668 million shares.

At the NSE, the scrip opened lower at Rs 1,568.35 from its previous close of Rs 1,591.60 and dipped to a low of Rs 1,458 before ending the day at Rs 1,458.50 - a loss of Rs 133.10 or 8.36 per cent. A total of 6.024 million shares were traded at the counter.

Analysts attribute the huge volatility in the counter to speculations over the swap ratio for the GECS merger. Led by institutional buying support, GTL has registered huge volumes of about 59.93 million shares since September 4. The scrip has spurted by nearly 27 per cent in the last two weeks.

Analysts expect the ratio to be in the range of 1:4 to 1:6, in favour of GTL. The merger is expected to augment GTL's revenues in the e-commerce and Internet segment. Having exited from the low-margin consumer telecom business, GTL is now focusing on high-end e-commerce, software and engineering services.

"Monday's fall in prices is only temporary. It's a corrective measure that had to happen due to the huge outstanding positions built by various operators at the BSE. But from now on, the scrip will start picking up," says an analyst with a Bombay-based securities firm. As of September 18, net outstandings at the GTL counter at BSE stands at Rs 2.9 billion.

The analyst adds that the scrip, at Rs 1,481.90, has a lot of potential to move up further in the short-term. "It could touch Rs 1,650-1,750. But existing holders are cutting their exposures at the current level. So it would be advisable to avoid any fresh exposures for the time being," he adds.

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