ICICI de-rates Tulip Telecom on FCCB issue

MUMBAI: ICICI Direct has de-rated Tulip Telecom and maintained ‘sell’ recommendation after the company failed to redeem the zero coupon FCCBs, which were due on August 26, 2012. It has advised investors to avoid bottom fishing in the stock.

“The default on FCCBs along with huge debt, inability of the company to find a strategic investor for its data centre in Bangalore and a poor operating performance amid a challenging macroeconomic environment continue to remain huge concerns for the company,” the note said.

“We have de-rated the stock to value it at 5x FY13E adjusted EPS to arrive at a target price of Rs 69. We continue to rate the stock as SELL and advise investors to refrain from bottom fishing in the stock. We will revisit our rating, if required, post the FCCB payment by the company,” it added.

The company had issued $150 million zero coupon convertible bonds in June 2007, which were due on August 26, 2012. The principal amount of bonds outstanding along with premium is $140.2 million prior to withholding tax.

The company has sought an extension to the deadline and expects to redeem the FCCBs by September 10, 2012.

At 2:45 pm, the stock was locked at 5 per cent lower circuit at Rs 84.50 on the BSE.