Bearish on Tata Teleservices: Pankaj Pandey, ICICI Direct

Pankaj Pandey, Head of Research, ICICI Direct, in a chat with ET Now talks about Tata Teleservices.

You are bearish on Tata Teleservices. Do you believe that we will possibly see a turnaround and which direction do you estimate this share going?

We feel that this company derives 55% of its revenues from Maharashtra. It also operates in Mumbai. Besides it operates in Maharashtra and Goa and what we feel is that the key performance indicators for this particular company have been deteriorating though the margins have improved. That is mainly because of the fact that the company was doing well over the past 2-3 quarters with the GSM launch wherein the company was adding about 1.4-1.6 million subscribers every quarter.

But going forward - with 3G bids being one of the highest in Mumbai circle - this company could face headwinds in terms of managing cost and irrespective of that what we have been seeing is that we do not see much improvement in its numbers going forward. But we are expecting that it will not deliver EBITDA of more than 560-570 crores odd over the next two or three years and will continue to make losses.

So in that sense given a scenario like this and compared to your large cap players, this company is still quite expensive. So in that sense we feel that this company will not perform well going forward and that is why we have a sell on this.