Decline in Emtel Shares Since IPO Sparks Controversy

The shares of Emtel have experienced a steady decline since the company was listed on the stock exchange in July. Kresh Goomany, the CEO of Emtel, argued that the market’s reaction has been irrational. He suggested that the primary reason behind this unexpected behavior may stem from speculative investment strategies rather than a reflection of the company’s true performance.

Emtel, a leading telecommunications operator in Mauritius, debuted on the main stock exchange on July 5 with its shares priced at Rs 23.

However, as of Tuesday at 1:30 PM, the share price had dropped to Rs 19—a decline of Rs 4, or 17.4%, since its initial public offering (IPO).

This unusual downward trend has left many investors and market observers puzzled.

Aslam Kathrada, a prominent businessman in the region, expressed his frustration, stating, “I find it hard to understand what is happening. Something is not functioning as it should, and I question whether the overvaluation of stock prices is a common practice among technical firms.”

Another financial professional, Vashish Muniah, a portfolio manager at DTOS Capital Ltd—part of the IBL Group—also struggled to comprehend the consistent drop in Emtel’s share value.

“Emtel is a well-established brand and a pioneer for its ability to introduce innovative products in Mauritius.

As a company with stable leadership and strong backing from the Currimjee Group, no one expected such a poor market reception,” he remarked in a message to the economic editor of a local newspaper.

Despite the sell-off, Goomany insisted that Emtel’s fundamentals remained strong.

He highlighted significant growth in the company’s performance indicators for the first half of 2024 compared to the same period in 2023:

• Revenue from services increased by 12.2%
• Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by 16.6%
• Substantial operational earnings increased by 23.4%
• Underlying profits surged by 17.5% before tax

Given these robust figures, Goomany admitted to being baffled by the market’s behavior.

“We can only conclude that the market has reacted irrationally. It seemed unreasonable for investors who bought shares at Rs 23 to sell them at Rs 19 just two months later when Emtel continues to deliver strong results and its fundamentals have not changed.

This led us to believe that speculation about share values was a primary driver behind some investment decisions,” he stated.

Regarding accusations that Emtel’s IPO price was overvalued, Goomany explained that the valuation was conducted by KPMG, a respected international auditing and consulting firm.

Their assessment placed the true value of an Emtel share at Rs 26.41, with a discount leading to the IPO price of Rs 23.

This divergence in market price reflected the interplay of supply and demand within the stock market, elements over which Emtel has no control.

Goomany emphasized that while the company cannot dictate market conditions, it remained committed to influencing potential investors through regular financial disclosures, meetings with analysts, and public announcements regarding its financial performance.

As Emtel navigates this challenging landscape, the company hopes to regain investor confidence and restore its share value in the long term.

Source: l’Express