Tata Tele to raise Rs 10,000 crore to clean up its balance sheet
Mumbai: Tata Teleservices plans to raise Rs 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 Rs 40,000 crore from Rs 20,000 crore and raise up to Rs 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 telecom analysts said infusing money into the company is one of the options available with TTSL, which has about Rs 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 Rs 30,000 crore to power its digital expansion and expand its network coverage and capacity. Last year, Vodafone Group, too, had pumped in nearly Rs 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 CHALLENGES
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 Rs 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 Rs 8,000 crore in an escrow account.
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 telecom analysts said infusing money into the company is one of the options available with TTSL, which has about Rs 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 Rs 30,000 crore to power its digital expansion and expand its network coverage and capacity. Last year, Vodafone Group, too, had pumped in nearly Rs 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 CHALLENGES
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 Rs 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 Rs 8,000 crore in an escrow account.
