Shyam Telecom Upper Circuit at Rs 51+ as RCom buys into SSTL ~ Not Justified

Shyam Telecom was on Upper Circuit at Rs 51+ this morning  as RCom buys into SSTL ~ Not Justified  

Anil Ambani’s listed Reliance Communication just announced a few days ago it’s picking up the wireless business of  Russian Parent’s Indian unlisted Sistema Shyam Teleservices Ltd that operates in India as a Telecom Service Provider under the MTS Brand

SSTL would get 10% of RCom in an all stock deal that was expected to conclude mid 2016.This is current worth just over @ 2000 crs assuming RCom Share Prce of @ Rs 80

I had blogged extensively on Shyam Telecom just two years ago in October 2013 when it had rocketed from Rs 16 to Rs 46 then…link is below

Shyam Telecom continues to Fly into a different Orbit ! From Rs 16 in August to Rs 46 upper circuit now !

Saturday, October 12th, 2013

Today Shyam Telecom hit an upper circuit of Rs 51.55 in the morning on NSE and also Rs 50.65 on BSE and has now opened out

The rise today is not really justified

Shyam Telecom owns just 380307 Equity Shares of FV Rs 10 of SSTL….That’s a paltry 0.01% of SSTL…If it thus opts to exchange these shares for RCom shares post deal it would get barely just over 25000 shares that’s worth just over Rs 20 lakhs

Market probably is under impression Shyam Telecom owns 24% of  SSTL while  it’s actually the Shyam Telecom Promoter Group of Rajiv Mehrotra that does own 22.65% of the SSTL Equity

SSTL has an Equity of Rs 3193.82 crs of which Russian Parent Sistema holds 56.68%,Russian Government owns 17.14% aggregating  a Russian Interest of 73.82% .The Shyam Telecom Group of Rajiv Mehrotra owns 22.65% with 3.53 % owned by over 18000 non promoter group shareholders

The Shyam Telecom Group that owns 22.65% comprises of Mehrotra owned entities of Intell Invofin,AT Invofin,Cellphone Credit & Securities and others

Each of these three Mehrotra Entities of the Shyam Telecom Group are common Investors in Shyam Telecom & SSTL and own 15.065%,7.186% & 6.745% in listed Shyam Telecom  and 10.95%,5.48% & 5.48% respectively in unlisted SSTL…..so it is these three Mehrotra Companies that will get under 6 cr shares of RCom valued under  Rs 500 crs currently should they opt for them in exchange of their SSTL holding

Shyam Telecom should continue to languish unless Rajiv Mehrotra decides to turn it around with fresh infusion of funds and new Business….now that’s a possibility and any share price rice will have to be assuming this and not the immediate Value benefit of RCom shares that the Company would be entitled too !

On the Other hand RCom with it’s alliance with Big Brother Reliance Industries and now buying out wireless business of SSTL  for India’s first Telecom Consolidation is  better positioned to scale up performance into the future …It has rallied in the past two months from Rs 55 to Rs 80+ today and is also available for Derivative Play….Do assess the Risks though

 

 

5 thoughts on “Shyam Telecom Upper Circuit at Rs 51+ as RCom buys into SSTL ~ Not Justified

  1. Sir
    Excellent analysis, in 2013 and the follow up.
    As an investor of SSTL allow me to make conclusion.
    I got unlisted shares Shyam Teleservices when Shyam Telecom demerged. Then in 2008 or earlier, I do not remember, I was offered to subscribe additional shares, 30% at Par. Now I hold 19500 shares of Sistema Shyam Teleservices. The investment value is Rs10. For which I will be getting RCom worth Rs 7 at CMP (Yearly High low RS 10/Rs4).
    If I am getting 50% loss in value and over 7 years of time. Mehrotra entities are also at the same position.
    As on today they have lost 150 crores and over a decade. Do you agree on my conclusion?

  2. Hi NRV A…your 19500 shares in SSTL should get you under 1200 shares in RCom should you opt for them…that’s worth a lakh now…so that’s a drop in value as expressed by you….however recheck the SSTL cost as it was demerger situation that gave you the shares

  3. I am of the view that some how the major restructuring and a complicated one so that’s beyond a small shareholder’s understanding. This restructuring will see the SSTL reverse merged into STL and hence getting the right price for STL shareholders. I could be wrong.

  4. The market cap of Shyam Telecom is meagre 34 Crores which is laughable. Bearing in mind that Shyam Tele is the flagship of the Shyam group. What kind of bids would Shyam put in for any new manufacturing contracts with size of the company as it stands today 34 Crores Hahahahaha

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