Rumours of merger with RJio draw traders to HFCL stock

PALAK SHAH Mumbai | Updated on January 10, 2018 Published on September 15, 2017

Stock hits upper circuit as news spread that announcement might be made at HFCL AGM

Himachal Futuristic Communications (HFCL), the stock which may bring back memories of 2002 historic market crash just days ahead of Union Budget, has yet again caught the fancy of traders on Dalal Street.

Once a favourite of Ketan Parekh, the trader banned for his role in 2002 market manipulation, HFCL has seen its market-cap more than double to ₹4,000 crore from ₹1,300 crore in two months since July.

Rumours that Reliance Jio, Mukesh Ambani’s telecom arm, and HFCL may announce a merger paving the way for Jio’s listing are driving up its share price.

The stock rallied by 10 per cent on Thursday as market buzz suggested the merger to be announced during HFCL’s annual general meeting on September 25. This could not be verified by BusinessLine.

Nahata’s initiative

The base of the rumour is a fact that Ambani and the Nahata family, promoters of HFCL, are close business associates. While Ambani owns 99 per cent in Jio, the Nahatas are said to own nearly one per cent stake in it. In fact, it was an arrangement between the Nahatas and Ambani that paved way for Mukesh’s re-entry into telecom sector in 2010, nearly 7-8 years after he gave up Reliance Communications to younger brother Anil upon division of the family assets.

Days after Infotel Broadband, a company promoted by Nahata, successfully bid for a pan-India broadband spectrum in 2010, Mukesh Ambani camp picked up controlling stake in it.

“Jio’s merger with HFCL just for listing does not seem logical,” said Sudip Bandyopadhyay, promoter, Inditrade Capital. “Jio would rather go for a public issue and even mop-up funds instead of making a back-door entry.”

Shankar Sharma connection

Brokers say HFCL came on traders radar last month when it allotted warrants to Shankar Sharma of research house First Global at ₹16 each. Sharma is best known for spotting multi-baggers among junk stocks and giving short calls on the market. He may own 0.78 per cent in HFCL post-conversion of warrants.

An ‘icing on the cake’ for HFCL came when Boston-based fund manager GMO bought 1.5 per cent stake in it this month. GMO too has derived good returns from a few small-cap stocks.

Published on September 15, 2017
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