The Department of Telecommunications (DoT) has prepared a draft note for the Empowered Group of Ministers on the price at which Telecommunications Consultants India Ltd (TCIL) should exit its stake in Bharti Hexacomm Ltd (BHL).
BHL is a joint venture between TCIL, a state sector company, and Sunil Mittal’s Bharti group. The latter has majority stake and management control. TCIL, which has 30 per cent of the equity, has been looking for a profitable way to exit for some years.
DoT’s note suggests fixing the base price of the 30 per cent stake of TCIL at a band of Rs 1,100-1,500 crore. The valuation has been arrived at by the disinvestment committee of directors in TCIL and is much lower than the Rs 1,801 crore pegged by consultants hired for this purpose.
Even at this price, the stake sale will be a bonanza for TCIL. It had only invested Rs 106.28 crore in three phases since 1995 for its 30 per cent stake. It means they will make 10-15 times the money they’d put into this telecom company.
The draft note has also asked for permission from the EGoM to allow TCIL to ask for bids wkith a validity of 180 days, with retrospective effect from September 13. TCIL has to also make an offer to the Bharti group, the majority stakeholder, which can exercise the right to buy the shares within 30 days.
BHL has GSM operations in Rajasthan and the northeastern circles. Mittal bought the stake from Delhi-based Shyam Telecom, as well as Mobile Telecommunications Company of Kuwait. TCIL has been looking at getting out of the joint venture after it had no role to play in the management of the company. However, the attempts have been stymied. In 2005, TCIL looked at selling its 30 per cent stake after Bharti made an offer to buy it at Rs 202.50 crore, which was lower than the reserve price worked out on the basis of the valuation of the company. The Telecom Commission decided no such deal would get through.
In 2006-07, BHL made profits and TCIL sought dividend payouts but this was shot down by the Bharti group, on the ground that the company was using its internal generation for expansion of network to keep pace with competition .
TCIL also sought listing of BHL, so that they could exit in a buoyant market, but this was also rejected by the Bharti group, on the reasoning that their flagship company, Bharti Televentures, was already listed and their policy did not allow them to list subsidiaries.
