Apr 26, 2012, 07.02 PM | Source: CNBC-TV18
Sanju Verma of Violet Arch Securities says TRAI's recommendations are clearly in favour of Reliance Industries.
Sanju Verma (more)
CEO & MD, Violet Arch Cap | Capital Expertise: Equity - Fundamental
According to Verma, the policy is not in favour of incumbents Bharti , Vodafone and Idea , who will have to shell out a total of Rs 95,000-1,00,000 crore to retain their existing spectrum once it expires in 2014.
On the other hand, she believes the government has gone out of its way to make the policy beneficial for RIL-owned Infotel. “The government has said that it will not allow new players to bid for the 4G airways before 2015, indirectly giving Reliance a head start of two-three years,” she said.
Another factor which she thinks will benefit Reliance is the freeing up of internet telephony services. “People who operate in that particular airwave spectrum will be the biggest beneficiaries and the likes of Bharti are going to get adversely impacted because nobody will want to pay 60-70 paise per minute to make an international call when you can make an international call from your landline at 1/10th to the price,” she explained. Since this facility is only offered by Reliance Infotel today, Verma says this policy is very partial towards Reliance Industries.
Telecom was one of the fastest growing sectors a few years back, with companies adding close to 15-16 million subscribers per month. This number has fallen to 5-6 million, indicating the deceleration with respect to incremental growth in the sector. Due to this, Verma advises staying away from this space altogether. With companies having to pay Rs 40,000-50,000 crore just to stay in the business, Verma questions the viability of doing business in India.
Below is an edited transcript of her interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying videos.
Q: Since we last spoke, there have been a lot of developments for the market but the April series has been absolutely flat. What do you expect to see in May and June?
A: The FII flows tells you the story with respect to the tepid performance in April. For January and March 2012, FII inflows were in the region of USD 8-9 billion. Come March, that dramatically dropped to something like USD 1.7 billion. In April that decelerated further, and as we speak, I am told the FII inflows number for the month of April to date has barely been a tepid USD 122 million or thereabouts. So clearly the fact that the FII flows were driving the market is a foregone conclusion.
That being the case, and given that the GAAR issue has been top of the mind for most foreign investors for the right or wrong reasons I am not surprised that the market is in a tepid mode. They will perhaps continue to be likewise in the next two months
Having said that, I am not particularly perturbed by this whole brouhaha about the downgrade in the outlook by S&P because that is something which has caught the fancy of almost anyone who has anything to do with the market. My personal sense is we perform best under pressure.
This is a clarion call to the government to get its act together. My personal sense is that you might see a lot more happening from a positive standpoint with respect to reforms getting that necessary boost because we have seen precious little in the last 3-3.5 years odd. Before we go into general elections, assuming we don't have midterm elections, I think now is the time to actually get the act together and the government perhaps have woken up if the comments of Pranab Mukherjee are anything to go by.
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