Tata Tele to Raise .₹ 10,000 cr to Clean Up its Bal­ance Sheet

Co to tap CCPS route for funds; gets share­hold­ers’ nod to dou­ble au­tho­rised cap­i­tal to .₹ 40,000 crore

The Economic Times - - Companies: Pursuit Of Profit -

Dev­ina Sen­gupta & Satish John

Mum­bai: Tata Te­le­ser­vices plans to raise ₹ 10,000 crore in an ef­fort to clean up its bal­ance sheet, which could help the fi­nan­cially-stricken telco be part of the con­sol­i­da­tion drive that the in­dus­try is go­ing through in an ex­tremely com­pet­i­tive cli­mate. The un­listed tele­com com­pany, con­trolled by Tata Sons and other op­er­at­ing com­pa­nies in the group, ob­tained share­hold­ers’ con­sent in a meet­ing held on Fri­day to dou­ble its au­tho­rised cap­i­tal to ₹ 40,000 crore from ₹ 20,000 crore and raise up to ₹ 10,000 crore through com­pul­so­rily con­vert­ible pref­er­ence shares (CCPSs), on a rights ba­sis.

Both Tata Sons and Tata Te­le­ser­vices did not re­spond to ET’s query till the time of go­ing to press.

The shares will even­tu­ally be con­verted into eq­uity shares at a fair mar­ket value de­ter­mined on the date of con­ver­sion. The op­tion to con­vert will ac­crue within three months of the al­lot­ment of CCPS, but not later than three years from the date of al­lot­ment. Se­nior tele- com an­a­lysts said in­fus­ing money into the com­pany is one of the op­tions avail­able with TTSL, which has about .₹ 30,000 crore as debt on its books.

Tele­com firms in In­dia are in­fus­ing fresh cap­i­tal to stay ahead in the game. This Jan­uary, Mukesh Am­bani-owned Re­liance Jio de­cided to in­vest an ad­di­tional ₹ 30,000 crore to power its dig­i­tal ex­pan­sion and ex­pand its net­work cov­er­age and ca­pac­ity. Last year, Voda­fone Group, too, had pumped in nearly ₹ 50,0000 crore in its In­dia unit. “This way (rais­ing cap­i­tal), at least, they will cre­ate more value and keep their op­tions open for ei­ther be­ing ac­quired or merged. Voda­fone’s talks with TTSL did not work out; Air­cel and RCom have their own pact; Idea-Voda­fone merger talks are in dis­cus­sion stage,” said a se­nior tele­com an­a­lyst from one of the big Four con­sult­ing firms who did not wish to be named.

An­other se­nior part­ner in a con­sult­ing firm who tracks the tele­com sec­tor said the Tatas need to in­vest more money to grow their busi­ness. “Even a firm like Idea Cel­lu­lar has posted losses, and Tata Te­le­ser­vices is buf­feted by head­winds, apart from its chal­lenge to pare debt,” he said on the con­di­tion of anonymity.


New Tata Sons chair­man N Chadrasekaran will have quite a few is­sues to deal with, in­clud­ing the big­gest chal­lenge of steer­ing the strug­gling Tata Te­le­ser­vices to safety, and set­tling its dif­fer­ences with its Ja­panese part­ner NTT Do­como. A re­ver­sal of for­tunes for Tata Te­le­ser­vices and change in the tele­com land­scape of the coun­try had prompted Do­como to seek an exit. When Do­como had pur­chased its stake in Tata Tele in 2009 for about ₹ 12,740 crore, the two com­pa­nies had agreed that it would get at least half its in­vest­ment back if the Ja­panese com­pany ex­ited within five years. But the Re­serve Bank of In­dia ruled out the op­tion, say­ing pay­ment for Do­como’s stake would have to be made at a fair mar­ket value.

The im­broglio then took a le­gal turn, with Do­como fil­ing for in­ter­na­tional ar­bi­tra­tion and win­ning an award of $1.17 bil­lion, and has since moved a lo­cal court to im­ple­ment the award. The Tatas too de­posited about ₹ 8,000 crore in an es­crow ac­count.

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