Anil Ambani group firm Reliance Infratel, which has proposed an initial public offer (IPO) of its shares, will utilise bulk of the IPO proceeds for repayment of loans totalling Rs 4,000 crore to its promoters.
The company is awaiting regulatory clearance for the initial public offer, estimated to raise close to Rs 5,000 crore for the company, and has filed a draft IPO prospectus with Securities and Exchange Board of India.
Out of the total proceeds from the IPO, Reliance Infratel has said, it would utilise Rs 4,000 crore towards repayment of loan to a promoter entity Reliance Communication Infrastructure (RCIL), while the rest would be used for issue expenses and general corporate purposes.
Besides RCIL, the company has also taken unsecured loans from another promoter entity Reliance Communications (RCom), as also from commercial banks and third-parties, for its business expansion needs.
However, the company does not envisage having any surplus distributable earnings anytime soon and therefore does not expect to pay any dividend in the foreseeable future.
"We will not be in position to pay dividends to our shareholders in the foreseeable future....Our business is capital intensive and we plan to make substantial capital expenditures to complete our current expansion plans," the company said in the draft prospectus.
The company said that it has very recently commenced operations as an independent entity pursuant to a demerger scheme, and its free reserves are only equal to the fair value of the assets that have been acquired under the scheme.
Therefore, "We do not expect having distributable funds or paying any dividends in the foreseeable future. Additionally, we have taken unsecured loans from our Promoters, which may be recalled at any time by the lenders.
"We may be unable to pay dividends in the near or medium term, and our future dividend policy will depend on our capital requirements and financing arrangements for further expansion, financial condition and results of operations," it added.
"We intend to use some of the proceeds from the Issue to repay a loan from one of our Promoters, RCIL," the company said, adding that the total outstanding as on September 15 was Rs 4,931.5 crore repayable by March 31, 2012.
"The purposes of the loan were to fund capital expenditures towards the roll-out of towers and passive infrastructure and to refinance high cost debt that had been drawn to fund capital expenditure for towers and passive infrastructure.
