ITI jumped 4.58% to Rs 17.57 at 14:14 IST on BSE after the Cabinet Committee on Economic Affairs approved a financial assistance of Rs 200 crore in the form of a soft loan to the company.
The Cabinet Committee on Economic Affairs issued the official statement during trading hours today, 28 February 2014.
Meanwhile, the BSE Sensex was up 84.44 points, or 0.40%, to 21,071.43.
On BSE, so far 5.64 lakh shares were traded in the counter, compared with an average volume of 58,216 shares in the past one quarter.
The stock hit a high of Rs 18.18 and a low of Rs 17.20 so far during the day. The stock hit a 52-week high of Rs 22.05 on 28 February 2013. The stock hit a 52-week low of Rs 12.39 on 6 August 2013.
The stock had outperformed the market over the past one month till 26 February 2014, rising 8.04% compared with the Sensex's 0.69% fall. The scrip had also outperformed the market in past one quarter, gaining 6.33% as against Sensex's 2.75% rise.
The small-cap company has an equity capital of Rs 288 crore. Face value per share is Rs 10.
The Cabinet Committee on Economic Affairs (CCEA) has approved financial assistance of Rs 200 crore in the form of a soft loan to ITI for mitigating the hardship being faced by the company in paying salary to its employees.
The soft loan of Rs 200 crore is for payment of salaries to the employees of ITI. Salaries will be disbursed as and when they are due, the CCEA said in a statement.
The direct beneficiaries will be the employees of ITI whose strength as on 1 December 2013 was 7633 and their family members. ITI, the company, will be the indirect beneficiary as it will not lose its employees, CCEA said.
As the proposal is for payment of salaries, there will be no any direct or major commercial impact. The soft loan will ensure that employees of ITI receive their salaries on time and motivate them to work in the company, which is on a slow and steady come back trail from being a 'sick' company, CCEA added.
Bangalore-based ITI, a public sector undertaking under the Ministry of Communications & IT, Department of Telecommunications (DoT) was established in 1948 and converted into a PSU in 1950. It is the first PSU in the country. The company has incurred accumulated losses of Rs 4527 crore as on 31 March 2013.
Due to a change in the technology preference in the market coupled with inadequate in-house infrastructure and R&D for catering to an exponential increase in wireless technology, ITI has not been able to compete on its own strength. In the past the company has been dependent on MTNL and BSNL to receive orders. The current level of losses of ITI is largely on account of lack of profitable orders and heavy interest burden on borrowings. With shrinking of demand for fixed telephone lines, the company had diversified its business from production of fixed lines equipment to GSM equipments, trading activities and turnkey projects. However, margins in trading activities have been rather thin. The high fixed costs along with the social obligation of running some non-profitable operations in the past have resulted in loss over the years. These losses have resulted in the inability of the company to invest in R&D and new product lines which could have helped the company achieve better margins in competitive market, where most technologies become obsolete quickly, CCEA said in statement.
ITI reported net loss of Rs 100.73 crore in Q3 December 2013 as against net loss of Rs 88.88 crore in Q3 December 2012. Net sales declined 25.03% to Rs 154.66 crore in Q3 December 2013 over Q3 December 2012.
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