Tata Teleservices (Maharashtra) stock faces higher volatility amidst merger news

MUMBAI: The stock of Tata Teleservices (Maharashtra) has been volatile over the past few trading sessions following the news flow on a possibility of stake sale by its major promoter Tata Teleservices to Sistema. The stock has lost 13.3% in the past three trading sessions to Tuesday. This has partially offset the 29% increase in the prior six sessions. It has lost 22% over a month.

A merger would be crucial for Tata Teleservices (Maharashtra) at a time when the company is mired by mounting losses due to steep competition. The company's net worth, which is the sum of equity and reserves and surplus, eroded further in FY13. It reported negative net worth of Rs 1,792.8 crore for the fiscal compared with the negative Rs 1,134 crore in the previous year.

The pressure persists even at the operating front. While the company has been able to earn operating profit, the profitability has dwindled. For FY13, earnings before interest, tax, depreciation, and amortisation (EBITDA) was Rs 500.6 crore compared with Rs 548.8 crore a year ago. EBITDA margin fell by 300 basis points to 19% by similar comparison.

The total debt of Tata Teleservices is estimated to be Rs 22,000 crore. Tata Teleservices (Maharashtra) had non-current liabilities of Rs 4,969 crore in FY13 compared with Rs 4,835.9 crore a year ago. The entry of a new telecom player such as Russian telecom operator Sistema, which operates in India under the brand MTS would help Tata Tele to consolidate its telecom operations.