At the current price of Rs 732, the stock is trading at a multiple of 10.3 times our estimated FY11 earnings. In today's conference call, the management stated that the industry's competitive intensity has gone up significantly in the past few months. It added that while the new introductory offers from its peers are crazy, these may have impacted its business to a certain extent. However, it expects things to return to normal once such offers are off the market. On the regulatory front, the management stated that it is awaiting the new government to make the necessary decisions regarding 3G spectrum.
In terms of opportunity, the management is optimistic about the prospects in the rural and semi-urban markets as the level of teledensity is fairly low. It expects revenue growth to remain steady on account of two reasons strong addition of subscribers and higher revenues from single customers (through value added services).
The company today announced its first ever equity dividend (of Rs 2 per share). While the management has not yet framed a dividend policy, it did state that this feature is likely to continue going forward. Keeping in mind that it has crossed its peak capex requirements (for spreading its presence across India), the company expects to generate free cash flows and subsequently reward its investors in return.
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