Tulip Telecom shares hit lower circuit; down 20% in 4 sessions

MUMBAI: Investors have dumped Tulip Telecom for the fourth consecutive session amid concerns over the company's ability to raise funds for the redemption of its zero coupon FCCBs. The company has an outstanding obligation of $140 million on the existing FCCBs with a face value of $97 million.

Tulip Telecom had missed its 26 August maturity deadline for redeeming FCCBs and had sought extension to complete the exercise by 10 September. However, it failed again to meet the new deadline.

"Over the last few weeks, the company has made significant progress in its fund-raising exercise through various instruments and internal accruals. The company is making all reasonable endeavours to meet its full redemption obligation," said the company's press release, dated September 2012.

"The stock has hit the lower circuit for four days in a row since September 10. We had recommended a SELL rating on the stock with a target price of Rs 69. Though the target has been achieved, we believe the stock would continue to remain under pressure until clarity emerges on the FCCB issue," said an ICICI Securities report.

Though the fundamentals of the company seem fine, the brokerage has kept it 'Under Review' and has advised investors to stay away from the stock until further clarity emerges on the FCCB issue.

At 12:40 pm, the stock was locked at 5 per cent lower circuit at Rs 69.75 on the BSE. Around 1.04 lakh shares were traded in the counter so far.