However, when contacted, company officials said that talks were on with a number of parties and a final decision was yet to be reached.

The tie-up rumour has resulted in a renewed interest among market players, which has been reflected in the share price as it flared up by Rs 127 (10 per cent) over the period January 1 to 5, 2001. The stock closed at Rs 1,400 on Friday, up Rs 52 from its previous close.

Packet switching would enable transfer of data either in the break up form or in a continuous manner.

It may be mentioned that the HFCL stock was on a downward trend since mid-December as many investment advisory firms had given a sale recommendation on expectation of a slowdown in its revenue growth in the next year.

According to a leading analyst, HFCL's turnkey business has no major orders apart from its own broadband network in Punjab, which would contribute to 40 per cent of HFCL's turnkey revenues next year.

A leading brokerage feels the markets have overreacted somewhat to HFCL's order book for the year 2001 and the boom in the telecom sector. Although HFCL had recorded an appreciable growth this year, there is some concern about the sustainability of growth next year due to a lack of turnkey projects.

The brokerage says the company has also eroded its value from telecom manufacturing division. Data shows that with nearly 55 per cent of HFCL's capital being employed in manufacturing, its return on capital employed (RoCE) is a meagre 10 per cent, much lower than the cost of capital.