This skepticism flows from the fact that this `navratna' scrip has been badly hit by its divestment plan having come a cropper following the Cabinet Committee on Divestment (CCD) dithering on decision to reduce government's stake in the company last month. The Rs 6,000 crore, zero debt company has been quoting at Rs 187 levels with a P E ratio of seven. MTNL intends to base its services on dual technologies of Groupe Station Mobile (GSM) as well as the code division multiple access (CDMA). The GSM is a versatile technology and can be used for value added services like the wireless application protocol (WAP). On the other hand the CDMA is based on wireless technology that is cheaper as well as faster. Also, it can be used to offer 3rd generation (3G) mobile telephony services since it is based on CDMA. The USP for the company would undoubtedly be its low rates.

MTNL's recently formed 100 per cent subsidiary, Millennium Telecom (MT) has already received the national ISP license. It would be offering value added services such as Internet services, call centres, broadband and warehousing etc.

The challenge for MT would be to woo Internet subscribers. A lack of marketing savvy and poor public perception have been the reasons for the comparatively low level of present subscribers that number around 30,000. MTNL's plans to offer Internet services by-passing the present dial-up system and having its own international gateway would help matters.

The National Long Distance telephony (NLD) foray is another segment where MTNL could exploit its huge user base in Mumbai and Delhi successfully. Incidentally, these two metros have the largest number of NLD users in the country. Then there are also plans of a direct-to-home (DTH) services using KU-band for TV broadcasting in collaboration with Prasar Bharati.

The financial performance of the company in the first half of the year has been a mixed bag. The company managed a decent bottomline owing to lower tax rates with respect to rebate under section 80 IA. Besides being a debt free company has helped the matters. Otherwise the operating profits have taken a hit due to burgeoning staff costs.

The moot question is: will MTNL rise to the expectations raised by umpteen possibilities for growth? The company has time and again failed to do so, hence drubbing at the market. It is time it shed the public sector culture and pruned excessive manpower costs. Drastic improvement in the service quality coupled with an effective marketing strategy could boost the fortunes of MTNL. However, divestment remains a key driver besides the successful foray into the cellular and other services.

Crisil India
Crisil, a leading credit rating agency, has once again put up a poor show for the quarter ended December, 2000. Operating profit (excluding extraordinary income) has fallen a huge 39 per cent to Rs 3.7 crore (Rs 6 crore).

Even a 16 per cent growth in sales income from Rs 8.5 crore to Rs 10 crore could not prevent a fall in operating profit. The market has shifted to debt and fund raisers as well as investors are preferring debt route to equity. Recent meltdown of ICE stocks as well as a low interest regime has spurred the growth of the debt market.

Crisil, with its expertise in this field, was best placed to exploit the situation in the most effective manner. However, intense competition from rivals such as Icra and Care has put pressure on its operating margin. Staff cost has risen by almost 50 per cent consequent on high remuneration being paid to retain intellectual capital. This has further pressured the profit margins.

All these factors have nearly halved the operating profit margin from a high of 60 per cent to 35 per cent in the quarter ended December, 2000. A 54 per cent jump in the depreciation cost to Rs 1 crore has further eaten into the bottomline. Profit before tax (excluding extraordinary income) stood at Rs 2.7 crore down 50 per cent from Rs 5.3 crore.

The share price of Crisil is very close to its 52-week low of Rs 164 and closed at Rs 200 on Thursday, January 04, 2001.

Income from rating and surveillance activities, credit assessments, advisory services and subscriptions to information products constitute the major source of income for Crisil. Rating activities contribute around 75 per cent to 80 per cent to the sales income while other businesses the rest.

Lately many companies are taking recourse to debt to raise funds. This fact coupled with opening up of new avenues like rating of insurance companies, would definitely look up the credit rating sector in the near future. Increased investment by the government, public sector and private sector in developing infrastructure would also give a fillip to demand for advisory services provided by the rating agencies. Yet, Crisil may have to be on the guard against growing competition from other institutions, besides monitoring cost.

Sachchidanand Shukla & Prashant Kothari