new Delhi 07 16, 2012, 15:10 IST
By Tony Munroe and Sumeet Chatterjee
REUTERS - The undersea cable unit of Reliance Communications
GTI Trust's offer for institutional investors, which opened on July 9, will now close on Thursday, two sources who had direct knowledge of the matter said, instead of Monday as originally planned.
The trading debut for GTI Trust was now set for July 25, the sources said, two days later than the July 23 indicated in a term sheet. The sources declined to be named, as is typically the case in ongoing capital-raising deals.
Reliance Communications, controlled by billionaire Anil Ambani, is looking to raise funds to ease a debt load of $7 billion as of March. It has been unsuccessful in several past attempts to raise money by selling assets.
GTI Trust has indicated a distribution yield of 9.5 percent to 11.5 percent for 2013, higher than the yield offered by Singapore-listed Hutchison Port Trust
While some investors said they are attracted by the yield, many others, including some who have invested in other Asian business trusts, told Reuters they were concerned about the business' growth outlook and the debt at its parent firm.
"The yield is attractive and if there's a two percent or so upside in top-line growth you are looking at a return of around 14 percent on an annual basis. Not bad," said an institutional investor who attended the GTI Trust roadshow but declined to be identified.
Another fund manager who is based in Malaysia and invested in recent Singapore IPOs said he is giving the offer a miss.
"Investors would be sceptical why they are offering such a high yield. We have to struggle to get a 5 percent yield on telecoms business trusts," said the fund manager, declining to be identified as he is not allowed to speak to the media.
SOVEREIGN FUNDS
Sources have said the company has been marketing the deal to sovereign wealth funds, including Singapore state investor Temasek Holdings. Temasek declined to comment.
"The date has been extended to give more time to these sovereign wealth funds to complete their processes," said a source.
The small retail portion of the IPO will be opened after the institutional book closes, one of the sources said.
A Reliance Communications spokesman declined to comment.
GTI Trust plans to sell between 642.2 million and 757.6 million units at a price range of $1.09 to $1.32 a unit, according to the term sheet, which makes the size of the base offering between $700 million and $1 billion.
The trust would have a market capitalisation of $1.27 billion to $1.54 billion.
The proposed yield is higher than the average telecoms yield of 6 percent to 7 percent across the region, brokerage Nomura said in a note on Tuesday. "Given lack of clarity/inconsistency around group strategy," a yield around 10 percent by itself "may not be enough to entice many investors," it said.
Shares in Reliance Communications were down 0.5 percent in the afternoon, slightly underperforming the broader market <.BSESN>, which was down 0.3 percent.
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