Mastek Spurts On Open Offer Talks

The Mastek stock price witnessed a roller coaster ride during the week, gaining 8 per cent on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). According to brokers, rumours of a possible open offer in the stock resulted in speculators taking up position in the stock. However, towards the end of the week, speculators liquidated their holdings.

The Mastek counter does not witness huge trading volumes on a normal trading day. However, it witnessed hectic activity when rumours of an open offer by a foreign fund to acquire 20 per cent of the stock pushed the stock value. It could not be confirmed which fund was interested in buying the stock, a dealer at a leading institutional brokerage commented.

The stock closed at Rs 195.90 on the BSE and at Rs 208.75 on the NSE. It touched a peak of Rs 213.80 on BSE and was frozen on the NSE at Rs 183.45. There was no trading in the stock on Tuesday on the NSE due to the price freeze.

Brokers said Mastek has not grown along with the growth witnessed in the industry. Packaged software product market is very competitive. There are very few Indian companies in the business. It did not emphasise on exports like other software companies in the country. The company marketed its products aggressively here. This resulted in lower margins for the company, a software analyst at an institutional brokerage said. Brokers said that Taib Bank was planning to pick up a stake in the company at a price of Rs 220. However, when Taib Bank officials were contacted in Bangalore, they were not available for comment. It could not be separately confirmed.

The spurt in the trading activity in the Mastek stock has been attributed to the significant number of private equity and infotech funds set up by institutions like Taib Bank, UTI and others.

Infotech stocks are selling well in the country and abroad. The UTI Infotech Fund which garnered around $50 m was invested in leading software stocks. It is due to the presence of these funds that illiquid counters like Mastek have witnessed trading activity. We believe that stocks like Mastek are overpriced at these levels as their fundamentals are not commensurate to their performance, a BSE broker said.