VSNL is finding favour with the market these days as the market reckons that the scrip is priced cheap.

The scrip of the international telephony major rose 3.2% to Rs 93 on BSE today. It had hit a high of Rs 93.95 earlier. Around 97,500 Videsh Sanchar Nigam (VSNL) shares changed hands on BSE in a little over two hours of trading. The scrip gained 1.8% to Rs 90.20 on Friday after the company announced results post trading hours Thursday.

VSNL has staged a comeback on the bourses of late. From Rs 70 on 24 April 2003, the stock has gained 32.8% in a little over a month to the current Rs 93.

The latest rise on the counter comes on the back of better than expected results and a liberal dividend announced by the company. For FY 2002-03, VSNL declared a dividend of Rs 8.5 per share (85%). At the current Rs 93, the dividend yield for the stock works out to 9.1% which is tax-free in the hands of investors. A cheap valuation with an attractive dividend yield has been the major trigger for the stock.

VSNL posted a 44% fall in sales to Rs 914.6 crore and 40% drop in profit after tax (PAT) to Rs 191.1 crore for the fourth quarter ended 31 March 2003.  For the year ended 31 March 2003, VSNL posted a 30% fall in sales to Rs 4,538.5 crore and a 45% fall in PAT to Rs 780.1 crore.

VSNL's performance in FY 2002-03 was affected due to the drop in international tariffs thanks to competition after the ILD segment was thrown open to private players on 1 April 2002.

In addition, the management of VSNL expects pressure on settlement rates and tariffs to continue in future . The increasing competition is likely to push prices down. However, the fall may not be as severe as it was during the previous year. The company also expects a rise in re-sellers in the Indian markets as the industry witnesses' intense competition in future.

At an analysts' meet held after the Q4 results, the VSNL management also indicated that its massive cost cutting efforts have started yielding results towards the end of FY 2002-03 and these efforts would gather momentum during this year.

VSNL has big plans in the NLD business. The company has planned a total project costing over Rs 1,300 crore over the next four years. Notably, the NLD market size is Rs 6,000 crore currently and growing at around 5-10% p.a. VSNL has finalised the rollout for the first three years including buy and build. It plans to roll out about 12,000 kms to 30,000 kms over the next two years.