The B K Modi group is possibly exiting the cellular business by selling its entire stake in Spice Communications to a strategic buyer. Spice Comm is the holding company of the group's cellular operations in the Karnataka and Punjab circles.
Foreign investors in the company-- Distacom of Hong Kong, AIG and Prudential Corporation -- have already mandated JP Morgan to sell their 77.5 per cent to a strategic investor.
Their effective holding in the company is more than the foreign direct investment cap of 49 per cent due to the cascading nature of the holding (through a maze of holding companies), sources said. The Modis have an holding of 22.5 per cent in Spice Communications.
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In response to a Business Standard questionnaire to Spice Comm's chief executive officer Dilip Modi on whether the group would exit the company, a company spokesperson replied: "We would not like to comment on this issue."
The sale could mark the Modi group's exit from cellular business for good. Last year, the group sold its interest in the Kolkata circle to Bharti for around $90 million.
According to estimates from merchant bankers, the group could expect a valuation of around $750-1,000 per user for their 4 lakh-plus subscriber base. Spice has 3 lakh users in Punjab, and another 1.4 lakh in Karnataka as on December 31.
Last year, the group was understood to be in talks with some cellular players for an alliance/divestment, but the talks failed over the valuation issue.
While the Bharti group is the second operator in both the circles and cannot bid for either, Birla-Tata-AT&T (BTAL) has presence in neither of the circles.
The Karnataka circle could complete the presence of BTAL in south, while its presence in the Delhi circle could provide contiguity if it were to acquire the Punjab circle, analysts said.
Hutchison-Essar, on the other hand, has received the license for the third operator in Karnataka but has yet to resume operations.
Earlier the Modi group had been considering merger of all three cellular circles prior to the sale of the Kolkata circle.