 "The many deals of Reliance Towers")
The first time one read about Reliance Towers was around the heady times of jumbo Reliance Power's initial public offering (IPO) in early 2008. In those pre-WhatsApp days, a viral SMS doing the rounds in the Street talked about an equally big Reliance Towers IPO to follow.
Though the company had by then been renamed Reliance Infratel from the earlier avatars of Reliance Telecom Infrastructure and Reliance Communications Rajasthan, ‘Tower’ had a nice rhyme with ‘Power’.
Not everyone was convinced of Towers and some even had doubts about Power. Those questioning the valuations had to run for cover when they were compared to canines making noise on seeing a haatiyon ka sawari (elephant rider) by those who loved the IPO.
The market collapse soon after humbled the elephant safari, vindicated the barking dogs and put the talk of a Towers IPO on the back burner. The demise of Lehman Brothers and the global financial crisis that followed meant it stayed there for over a year.
In September 2009, Reliance Infratel filed IPO papers with the markets regulator for a Rs 5,000-crore IPO. It wanted to sell 156 million shares or 10 per cent. At that point, it had 48,100 towers. Its revenue was Rs 4,934 crore and net profit Rs 1,585 crore in FY09. According to that prospectus, the promoters owned 95 per cent and the non-promoter group consisted of 11 foreign shareholders.
These included funds of George Soros’ Quantum, three funds of Raj Rajaratnam’s Galleon and NSR PE LLC, a vehicle of New Silk Route, co-founded by former McKinsey chief Rajat Gupta. Less than a month of filing that prospectus, in an unrelated development on October 16, 2009, Rajaratnam was arrested by the US federal police.
Following much reported developments since, both Rajaratnam and Gupta are serving prison sentences in the US for various securities market offences. Galleon has since wound up, while Gupta-less NSR is still trying to find its silk. HSBC Daisy Investment (Mauritius), Drawbridge Towers and Investment Partners B (Mauritius) were the other investors with small stakes. An IPO would have given these the needed liquidity and a potential exit. It was not to be.
In June 2010, Reliance Communications (RCoM), which owns most of the Reliance Infratel stock, announced a Rs 50,000-crore mega merger with GTL Infrastructure. RCoM would get much- needed cash of Rs 11,000 crore, helping to deleverage its balance sheet. The elephantine deal, touted as the largest ever, was splashed across the pink papers and adjectives like ‘transformational’ or ‘game-changing’ were heaped liberally on it by unnamed analysts. By September 2010, this deal, billed to create the second largest tower network, was called off. RCom refused to say why, citing confidentiality pacts.
Since then, ‘Reliance towers sale’ has become an evergreen story across papers and TV. Everyone from blue-blooded private equity funds like Carlyle and BlackStone to foreign tower companies to local rivals have been in the race to buy the Reliance Infratel stake or its towers at some point. The size of stakes on the block varied from 10 to 26 to 51 per cent, valuations often limited only by rainmakers' imagination.
The ‘Vodafone IPO coming soon’ story would probably be a distant second on this evergreen list. RCoM last week announced it had signed a 'non-binding' term sheet with private equity firm TPG and the Sanjiv Ahuja-led Tillman Global to sell the entire tower business for a speculated Rs 21,500 crore, with the possibility of another Rs 7,500 crore for the optical fibre network.
It would be in the interest of millions of the Anil Ambani group's shareholders, who'd benefit from the debt reduction of RCoM, and private investors of Infratel that the deal becomes binding and the ‘Reliance Towers story’ ends soon.
