Company appoints SBI Caps; restructuring plan likely in 30 days.
Manoj Tirodkar of GTL says he has just survived a “tsunami and is still recovering from it”. But instead of getting bogged by the bloodbath in the stock markets that saw his two listed entities — GTL Ltd and GTL Infrastructure — shave off Rs 4,400 crore from their combined market cap in seven days, he would rather look forward.
In the process, he wants to look at ways to infuse the much-needed equity in his companies and deleverage the balance sheets. Parallely, Tirodkar would also explore options to consolidate his operations via mergers or strategic stake sale that may even get him significantly diluted.
In an exclusive interview with Business Standard, Tirodkar, the founder and promoter of Global Group which includes GTL and GTL Infra, said, “Yes, debt is an issue. So we need to revisit our portfolio of investments, equity and debt and restructure them to protect the interest of our stakeholders.”
He also supports bringing all the tower companies together. “We can’t have five tower companies in India. Consolidation has to happen to unlock value,” he said. “I cannot be emotionally attached at the cost of business and my shareholders. If a merger or a strategic partner can bring value, so be it. I won’t stop it for fears of getting diluted.” He said the same thing to his lenders last Friday, when he met them to soothe nerves as everybody got worried that a cash-strapped GTL would start defaulting on its loan commitments.
“We have brought in SBI Caps to review our operations and funding. Together, within a month, we shall come up with a roadmap. And we would work with every single one of them to address their concerns,” he said and went on to add, “Our bankers have not lost money with us and we have in the past paid all of them, have taken care of our shareholders. We would like to continue to do so even in this current extraordinary situation.”
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GTL’s consortium of lenders including SBI, ICICI Bank and Standard Chartered are waiting eagerly for the answers and would count days to hear the recovery plan. It’s ironical, as all those who lauded Tirodkar’s massive scale up after acquiring Aircel’s towers last year in India’s largest all-cash deal, are now criticising his rapid pace of growth.
Problems indeed exist. An over leveraged balance sheet that is now hurting. The crisis has aggravated as interest rates have gone up, resulting in higher payouts. According to Tirodkar, a four per cent rate rise alone has translated to an interest payment increase of Rs 600 crore for his companies.
But the problem is, there has been a sharp drop in revenues and cash flows due to the current squeeze in the scam-tainted telecom sector, which has triggered low capital expenditure, lesser spending, muted growth and a falling demand. “Today there is a serious challenge for infrastructure, especially telecom players, to raise money either debt or equity. Most doors have closed,” he argued.
From the lenders perspective, even though GTL Infrastructure has a higher debt burden of Rs 10,000 crore in its books, it’s a lesser headache for them as the debt is a secured one, having an asset cover of one and a half times.
But GTL Ltd, they argued is a bigger challenge. The company has close to Rs 4,000 crore leverage, and sources in the banking industry said, it’s largely unsecured.
“The worry is many of the lenders have agreed to offer a credit line to a company which does not have assets on the ground. It’s a service provider, much like an EPC contractor. And many of the lenders have very high provision on these loans,” said a senior banking official on condition of anonymity as his bank has exposure in the company.
While GTL infrastructure owns the assets and earns rental income, GTL sells the equipment and offers other services to operators.
GTL has also made investments in GTL Infrastructure, and the bankers said it holds many of the bank guarantees, so if GTL starts defaulting, the crisis will snowball. For them, GTL Ltd is like “a de-facto holding company for GTL Infra.”
The lenders have a prescription without affecting the business model. For them GTL needs an immediate equity infusion of Rs 2,500 crore to balance the debt to equity ratio.
Part of that, some bankers felt, may get structured by some of the existing lenders themselves through convertible instruments like bonds or debentures and preference shares. The rest around Rs 500-Rs 800 crore will have to pumped in by the promoter himself by monetising unencumbered assets like real estate.
But there’s a catch, as the equity value of the company has significantly got eroded, post conversion, there could be a scenario where lenders have get a significant equity position in the company. “So there could be hard negotiations,” added another banker.
Tirodkar does not want to talk specifics yet. “I cannot at this point share details of the restructuring. It’s work in progress. But if you study our numbers, in the medium term we do need Rs 3,000 crore equity,” he said. But then comes his warning.
“A bear cartel is trying to create a fear psychosis in the minds of the shareholders. I don’t want to get into which broker or corporate house is responsible for systematically beating down the stocks. But I won’t let anybody run away with our company for a song by destroying equity value of our minority shareholders.”