GTL shares tank on debt repayment, fund raising concerns

Shares of telecom infrastructure company GTL Ltd plummeted Monday due to concerns over debt repayment, pledged shares and fund raising, despite the chairman's assurances it had not defaulted and that its business fundamentals remain strong.

GTL shares declined as much as 62.3%. the sharpest in 54 months, to Rs 127.50, and GTL Infrastructure as much as 48.5% to its all-time low of Rs 15.25 in a weak Mumbai market.

GTL and GTL Infra are part of the Global Group, which owns 32,000 telecom towers and has revenues of more than USD 1.5 billion.

Dealers said GTL may have either fallen behind schedule of repayment or a stake-holder could have sold shares in the open market.

GTL later clarified to the stock exchanges that neither promoters nor entities relating to promoters have sold any shares.

"I believe we are strongly committed to our banks and institutions," Chairman Manoj Tirodkar told a television channel, in a bid to allay investor fears.

"I believe we are regular on our payments and I believe that we will be in touch with them (lenders) if we have any issues," he said.

Speaking to Reuters, Tirodkar said he believed the telecom sector is under pressure due to the ongoing investigations into 2G spectrum allocation, higher interest rates and low average revenue per user, which may be pulling the stock down.

He brushed aside concerns over Mauritius tax treaty, saying the question of Technology Infrastructure, the Mauritius company that holds 11% stake in GTL, selling shares does not arise.

"As early as Friday we have spoken to them (Technology Infra) and they are a long-term investor. They have committed that they will remain with the company. So there is no reason for me to believe that that would have changed from Friday to now," Tirodkar said.

A local analyst said the tax treaty being the reason behind the stock plunge is not very likely, especially after Tirodkar's clarifications.

India and Mauritius are expected to review the existing Double Taxation Avoidance Agreement (DTAA) soon, a senior finance ministry official said, but declined to provide details on a timeline.

The stock market fell as much as 3.1% on Monday as investors were worried that foreign inflows could take a hit.

Indian officials say more than 40% of total foreign direct investments (FDIs) to India originate in Mauritius, a substantial amount of which are believed to be illicit funds, used by Indian companies to avoid tax.

Capital gains are tax-exempted in Mauritius, and under the agreement with India, a Mauritian company cannot be taxed in India.

Some dealers said the company's cash position and the recently scrapped fund raising plan could also be the trigger behind the sell-off.

The company recently scrapped its plans of to raise about USD 300 million from institutional investors due to adverse market conditions, according to a report by Economic Times.

However, Tirodkar said the company had not conducted any roadshows for the fund raising.

Analysts, however, said they had not expected the plans to go through due to weak market conditions.

As of March 31, the company had cash and bank balances of Rs 1200 crore.