Decks cleared for transfer of 740-odd acres; Tatas’ battle with govt set to end.
After numerous hiccups and battles, nine years since the erstwhile Videsh Sanchar Nigam Ltd (rechristened Tata Communications) was privatised in 2002, a draft cabinet note prepared by the Department of Telecommunications (DoT ) has valued the 740-odd acre surplus land held by the company across three states — Delhi, Maharashtra and Tamil Nadu — at Rs 6,156 crore, or Rs 8.31 crore an acre.
The cherry on this land bank cake, the 70-acre plot in upmarket south Delhi locality Greater Kailash 1, is valued at a steep Rs 3,863 crore, or Rs 55 crore an acre.
Apart from officially putting a value to the surplus land bank, perhaps for the first time after a a majority in VSNL was sold to the Tatas, the note also lays down a clear road map for the transfer of land, hopefully putting paid to the bitter battle that has raged between the government and the Tatas over this land parcel’s demerger process ever since the salt-to-software conglomerate bought majority control in VSNL for Rs 143.9 crore in 2002.
| DEAL HISTORY |
| In 2002, Tatas acquire government-owned telco VSNL for Rs 143.9 crore |
| The deal does not include VSNL’s 740.63 acre surplus land spread across three states — Delhi, Maharashtra and Tamil Nadu |
| In 2003, Department of Telecom values the land at just over Rs 150 crore |
| In 2005, the government forms a special purpose vehicle, Hemisphere Properties (HPIL), to execute demerger of the land bank |
| In early 2011, telecom minister Kapil Sibal sets up a department panel to look into the causes of delay |
| In April, DoT panel blames the Tatas for the delay |
| Tatas respond, saying they have been unwillingly holding the land due to a lack of clarity on how it needs to be demerged; say they are spending Rs 3 crore per annum on just maintaining the land, which is hurting Tata Communications’ fund-raising plans |
| In July, Telecom Commission decides to demerge the land bank |
| Late August, Telecom Commission, DoT’s apex decision-making arm, asks DoT to acquire 51.12% in HPIL; DoT prepares draft for cabinet permission |
| VALUE OF SURPLUS LAND | ||
| Location | Acres | Valuation (Rs crore)* |
| Delhi-GK1 | 70 | 3,863 |
| Delhi-Chattarpur | 58 | 1,511 |
| Halishahar | 35.19 | 83 |
| Pune-Dighi | 196. 21 | 198 |
| Pune-Kalas | 15 | 22 |
| Pune-Bhosari | 132.13 | 133 |
| Pune-Bhopkel | 88.1 | 64 |
| Pune-Dighi Defense | 92.55 | 93 |
| Padianallur | 53.44 | 186 |
| Total | 740.63 | 6,156 |
| *Rounded-off figures | ||
The draft note is also seeking permission from the cabinet for the government to acquire 52.12 per cent stake in Hemisphere Properties India Ltd (HPIL), the special purpose vehicle formed for the explicit purpose of holding the demerged surplus land of VSNL.
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Currently, HPIL has an authorised capital of Rs 5 lakh, which is subscribed by seven companies of the Tata group. Another 20 per cent of HPIL is now being proposed to be held by the original shareholders of VSNL whose shares were acquired through an open offer by the Tatas to increase their stake. The remaining 28.88 per cent will be held by all non-promoters, including UTI, banks, FIIs, mutual funds, ADR holders and the Indian public amongst others, according to the draft note.
When contacted, a Tata Communications spokesperson declined to comment on the issue of the DoT note to the cabinet. However, company sources say they view it as a welcome move. The note has also prepared the road map for the transfer of land, which after cabinet approval will be followed by approval from the board of Tata Communications and its shareholders.
Thereafter, applications have to be filed by erstwhile VSNL and HPIL in the high courts of Mumbai and Delhi for transfer of surplus land from VSNL to HPIL. The draft note has valued 58 acres of land again in the posh Delhi-Chattarpur area for Rs 1,511 crore, or Rs 26.06 crore an acre. This compares well with other similar deals in the area of late. India’s largest real estate firm DLF recently sold 10.8 acres in Gurgaon to an NRI investor for Rs 280 crore, or a little over Rs 27 crore an acre.
In 2002, the government roped in the Tatas as the strategic investors and handed over control of the company to them by divesting 25 per cent of its shareholding (which was at 51.12 per cent). However before the start of the bidding, 740 acres of land of the total 1,230 acre was demarcated as surplus land in which the successful bidder would have no interest. This land, it was decided, would be demerged or hived off into a new company.
The land transfer however became a major bone of contention between the Tatas and the government. The Tatas have maintained the company made several attempts since 2005 for the demerger of surplus land but the DoT did not respond to its pleas. The Tatas also raised the contentious issue that they had to pay a stamp duty of Rs 500 crore to transfer the land, even when it was neither the owner of the land nor would it be its beneficiary in any form. DoT kept quiet on the issue. The Tatas contended the surplus land remained secured and unused by the company, and it continued to bear the expenses towards the surplus land’s upkeep and security as well as the associated property taxes. They also blamed the government as the company had been unable to raise any non-debt funding during the past few years to support its investment and growth aspirations due to the non-resolution of the issue.
Communications minister Kapil Sibal, however, appointed a telecom department panel early this year on the contentious issue. The three-member panel investigating the delay in the demerger blamed the Tatas for the impasse. They argued the Tatas' approach was to resist a demerger on one pretext or the other, and instead they tried pushing other alternatives such as the sale of surplus land by public auction, retention of surplus land by VSNL, which would benefit them.
The battle even got political overtones when former disinvestment and telecom minister Arun Shourie blamed the UPA government, particularly home minister P Chidambaram (who was earlier the finance minister) and current finance minister Pranab Mukherjee, for the delay.
