Downhill ride for India Securities?

Shares of India Securities (ISL) swung wildly on Thursday following announcement of the Ruias-promoted Essar Group’s exit from Vodafone’s Indian operations.

In a knee-jerk reaction, the ISL stock puffed up to an intra-day gain of 6% touch the exchange-mandated upper circuit of `68.05 but then let off steam and closed the trading session at `63.70, a fall of 1.77% compared with Wednesday’s closing price of `64.85.
In an indication of the frenzy that gripped the ISL counter, a little over 5 lakh shares changed hands during the day, compared with the scrip’s two-week average trading volume of 1.86 lakh shares.
The stock touched its 52-week high of `76.05 per share on January 19, when news broke that Ruias were planning to merge Essar Telecommunications Holdings Pvt Ltd, the arm that holds 10.97% in Vodafone’s Indian operations, with ISL. The merger plan was part of Essar’s effort to discover the value of its holding in Vodafone and hopefully get a premium over the $5 billion guaranteed through a put option given in 2007 when Vodafone picked up 67% in Hutchison Essar, where Essar had the rThe 10.97% equity holding in Vodafone, which was proposed to be moved to ISL through the reverse merger, was worth about $1.67 billion, or nearly `7,700 crore, nearly seven times the value the market assigns

Had the merger gone through, ISL shares would have risen manifold to reflect the value of the asset being transferred to its books. Now, with no possibility of merger, analysts feel there is only one way the stock will move — down.