Natwest Securities has come out with an analysis update on Videsh Sanchar Nigam L.limited (VSNL).

"Still rings sweet", more than reflects the bullishness of Natwest Securities buy recommendation for the Videsh Sanchar Nigam's stock.

Explaining its position, the equities research firm points out that VSNL's net profit of Rs 503 crore was within 1 per cent of its estimates and the 21 per cent growth year-on-year in international telephony was also close to its earlier estimates.

The update goes on to explain that despite the growth in international traffic, a worsening incoming to outgoing call ratio points to the growing disparity between the Indian and international collection rates, which is likely to continue if domestic rates are not brought down.

The report further underlines the importance of the new revenue sharing agreement (effective April 1997) with the DoT which offers Videsh Sanchar Nigam Ltd substantial protection from any steep drop in international accounting rates in the future. The broking house goes on to explain that a fall in domestic rates should help VSNL, as volumes should increase.Estimates place the PBT forecasts for 1997-98 at Rs 1025.9 crore and a Net profit of Rs 687.3 crore. EPS is also projected to jump from Rs 62.9 to Rs 72.4.

Natwest goes on to emphasise that while the rate-sharing agreement with DoT is unique in the terms of protection it offers to Videsh Sanchar Nigam Ltd , even after factoring a 10 per cent fall in Videsh Sanchar Nigam Ltd's net revenue every year after 1999, its fair value for the stock is Rs 1420 per share. The stock has already outperformed the market by 24 per cent since its GDR issue in March, which merely serves to strengthen the buy recommendations of the broking house.

The views expressed in the article are those of Natwest Securities and not those of The Financial Express.

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