Good morning my dear readers,

Long ago, in 2002, there was a pretty cool special situation in a company called VSNL.

~

This was a time when a lot of private telecom players were entering the market and VSNL, it was feared will not be able to compete properly with new technology and efficient private players.

(It is hard to imagine today that in 2002, wireless phones were just getting popular and it used to be something like 10rs/min to call).

~

So, in 2002, the Govt divested its stake in VSNL to the Tatas.

(The price per share of VSNL fluctuated between 100/share to 65/share in 2002).

This sale happened just around the time of a very intense 'Telecom price war' with calling rates tumbling every year.

~

And it made sense,

1- Improve Operational Efficiency, By divesting its stake in VSNL, the government aimed to bring in private management that could run the company more efficiently.

2- Reduce Fiscal Burden.

3- Promote Competition, the government wanted to provide an equal footing to VSNL against new, private competitors and the divestment did just that.

4- Raise Funds, divestments provide a significant source of cash for the Govt.

~~

Eventually, the company held its own and is functioning well even today.

~~

And from a shareholders point of view, it seems even that they did well for themselves.

From 2002 to the high of the 2007 rally, the VSNL stock went from 100/share to a high of 446/share in January 2008.

(It is too depressing to talk about what happened to the global stock markets in 2008-09).

#Subprime.

________________________________________________________________

VSNL is a good example of a successful divestment and special situation.

History is filled with such examples of how special situations have unlocked value.

I will try my best to dig up more such examples so we can learn together.

See you Friday.

My Best,

Neil Bahal

Founder

Negen Capital