Noida, India (PressExposure) May 27, 2009 -- Only a day after the India's largest telecom service provider, Bharti Airtel, cleared the air about it is in dialogue with the South African telecom giant, MTN, for the much-awaited deal, stock analysts are hoping that the news will help the former in acceleration of profit growth but at the same time is also expected to leave a negating impact on the company's shares in the Indian stock market.
The reason, well it is quite simple. The Delhi-based telecom major is expected to pay premium to MTN for the deal which might led to equity dilution, summing up to 57 percent in total which ultimately will have an impact on company's EPS policy (Earning Per Share), hence, one could expect a significant drop in EPS in the present fiscal.
Since, EPS is the share of profit allocated to each share, hence, in tune with equity dilution (due to the deal), a detrimental effect can be seen on the stock prices of the company in near future.
However, the experts also believe that the drop in share prices is chiefly short-terminal and once the deal completely materialises, investors confidence will return into the company.