Sensex Opens Flat; Bharti Airtel Gains on Acquisition News

Fri, 24 Mar 09:30 am

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Asian equity markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.04%, while the Hang Seng is up 0.10%. The Nikkei 225 is trading higher by 0.99%. US stock markets closed slightly lower while the European finished higher in their previous trading session.

Meanwhile, Indian share markets have opened on a flat note with a positive bias. The BSE Sensex is trading up by 38 points while the NSE Nifty is trading up by 12 points. The BSE Mid Cap index and BSE Small Cap index both opened up by 0.3%.

Sectoral indices have opened the day on a mixed note with realty sector and fast moving consumer goods sector leading the pack of gainers. While information technology stocks and consumer durables stocks are witnessing selling pressure. The rupee is trading at 65.42 to the US$.

Telecom stocks are trading in green with ITI Ltd and AGC Networks being the most active stocks in this space. As per an article in a leading financial daily, Bharti Airtel has entered into a definitive agreement to acquire Tikona Digital Networks' 4G business for Rs 16 billion, including spectrum and 350 sites in five telecom circles.

Reportedly, Airtel will take over the 4G business in four circles, barring Rajasthan. In the Rajasthan circle, it will be accomplished through Airtel's subsidiary Bharti Hexacom Limited. Tikona has a spectrum of 20 MHz in the 2,300 MHz band in these five circles. The company had bought these for Rs 10.6 billion during the 2010 auction.

With the deal, Airtel is gearing up to face Mukesh Ambani's Reliance Jio with a stronger data offering and faster customer addition. Further, the deal would also be another step in the process of consolidation set off by the aggressive pricing strategy of Reliance Jio.

Post completion of the deal, Airtel will have 30 MHz in the 2,300 MHz band in 13 circles, giving it a tremendous advantage to handle the surging data demand.

Meanwhile, Madhu Gupta, Managing Editor of ResearchPro, believes higher investments to upgrade infrastructure (Subscription Required) will further stretch the company' balance sheet. Bharti Airtel has planned capital investments of Rs 600 billion called 'Project Leap' to upgrade its infrastructure and protect its home turf. Here's a snippet of what she wrote:

• "The tariff war, no doubt, will benefit the consumer. But the profits and shareholder returns of the telecom industry will be severely crippled if the mindless battle to gain supremacy rages on."

Bharti Airtel had bagged 4G airwaves in only four of the 22 circles in the 2010 auctions. The company has subsequently followed a strategy of buying out companies with 4G spectrum and this is the fifth such acquisition since 2015.

The move comes less than a month after Airtel said it would acquire the Indian operations of Norway's Telenor ASA to strengthen its presence in the 1800 MHz band.

Bharti Airtel share price opened the day up by 1.5%.

Moving on to the news from stocks in power sector. As per an article in The Economic Times, National Thermal Power Corporation (NTPC) has exceeded the target of generation capacity addition of 11,920 MW set for the 12th Plan (2012-17) by adding 12,840 MW. With commissioning of 800 MW Unit in Karnataka, 250 MW Unit in Assam and 20 MW at Bhadla Solar in Rajasthan, the total installed capacity of NTPC group has become 49,943 MW.

Against a target of 11,920 MW (11.92 GW), it has added 12.84 GW in the past five years. With this, NTPC now has 49.94 GW of capacity, a fifth of the total 300 GW for the country as a whole. This is about 15% of the country's total installed power generation capacity.

Further, it now has 19 coal based, 7 gas based, 10 solar PV, one Hydro and 9 subsidiary or joint-venture power stations. NTPC is constructing another 22 GW of capacity at 23 locations. Out of this, 4,300 MW being undertaken by the joint venture and subsidiary companies, the reports noted.

In fact, NTPC has produced 4.7% more power in the 11 months of the current financial year than the previous financial year. Thereby helping the Indian economy grow at a healthy 7% in the fourth quarter in spite of demonetisation in November.

Additionally, NTPC coal stations clocked highest-ever daily generation of 749.63 MUs on March 22 2017, over the previous highest of 742.51 MUs in 2016.

Finally Hitting the Mark...

What remains to be seen is whether the power producers get the advantage of the additional capacity with better tariffs and minimal distribution losses. Vivek Kaul has explained the anomaly in the power sector in an in interesting piece in his Diary - In Power-Surplus India, Why Power-Cuts are Still the Norm.

NTPC share price began trading up by 0.3%.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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