Tatas to hike VSNL stake via market purchase

Not to exercise call option to buy govt's residual 26.10%.

The Tata Group has decided not to exercise the call option to acquire the residual 26.10 per cent stake held by the government in the telecom and internet major Videsh Sanchar Nigam Ltd (VSNL).

The group would look at increasing stake through market acquisitions, while the call option expires today.

A source to the developments said, "Tata Group has a combined effective shareholding of over 50 per cent in VSNL, and will continue to acquire additional stake through market acquisitions. Under the circumstances it was not considered to be a significant advantage in exercising the call option". The government divested VSNL in 2001, with Tatas acquiring the majority stake in the company. However, the government was holding on to 26.12 per cent stake in the company that gave it a controlling power and two nominees on its board.

According to the data on BSE, Panatone Finvest (a Tata group entity) holds 40.7 per cent in VSNL, while Tata Sons 8.51 per cent, Tata Power 0.09 per cent and Government of India 26.12 per cent. Institutional investors and individuals hold the remaining stake in the company. The government was earlier ready to dispose of the residual stake, but had asked for a golden share in the company.

A golden share means that the government would sell its 26.12 per cent stake in the company and in return ask for a single share with controlling stake.

This was not acceptable to the Tatas.