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Will Reliance Communication scrip hold now?

Reliance Communication scrip, which recently crossed the Rs 1 lakh crore market capitalisation mark, faces a question mark after it failed to acquire a controlling stake in Hutchison Essar, reports Suman Layak.

india Updated: Feb 12, 2007 01:29 IST

The Reliance Communication scrip, which recently crossed the Rs 1 lakh crore market capitalisation mark, faces a question mark after it failed to acquire a controlling stake in Hutchison Essar.

The scrip had made a smart progress after the news of its bid on Hutch had surfaced in early December 2006.

Apart from the news, the scrip was also driven by strong fundamentals. The Hutch-Essar Reliance fit was also talked about as Reliance Communication had planned its own GSM foray and Hutch's Indian presence would have complemented what Reliance has invested in GSM so far.

VK Sharma, the research head of Anagram Stockbroking said, "If Vodafone is buying Hutch-Essar stake at an enterprise value of $20 billion, then I do not think the Reliance Communication stake will be affected. This is because the market thinks this value is more than what should be paid and if a competitor is paying it then that is bad for the competition and good for Reliance Communications."

"However, if the deal is done at an enterprise value of $17 billion, then the Reliance Communication scrip may fall as it would seem that the competition got a good deal," Sharma said.

An analyst with Angel Broking Harit Shah said: "The bid for Hutch Essar definitely had some sentimental value. But you cannot say much in this kind of a scenario. Like when the Tatas won the Corus bid, the scrip price fell immediately. However, here the bid news has been pushing the stick up."

He added that this might be a good time to pick up some shares in Reliance Communication. "There is nothing wrong fundamentally with the company. It is a good scrip and if the price falls this might be a good time to buy."

Email Suman Layak: Sumanlayak@hindustantimes.com