Mukesh Ambani's Reliance Industries Ltd eyes GTL Infra buyout

Loss-making telecom tower major GTL Infrastructure's rising debt and falling stock price has interested Mukesh Ambani's Reliance Industries Ltd (RIL), which is exploring a buyout as it looks for early rollout of its broadband wireless access (BWA) services.

However, last week, the GTL Infra board had proposed a corporate debt restructuring (CDR) citing slowdown in the telecom industry, which, telecom analysts say could delay any transaction by GTL. Sources said RIL is also looking to pick up the 29 per cent stake in the tower firm acquired by ICICI Bank in July, with whom the firm had pledged its shares. Sources said that ICICI Bank's 29 per cent stake buy in GTL is a non-core business for the bank, which it would like to sell off. The bank is in touch with prospective buyers in this regard.

GTL shares have touched an all-time low plunging 70 per cent since June with its market cap value falling to around Rs 1,400 crore. This could be a beneficial proposition for the new buyer, who might benefit from the attractive valuation. Industry sources said RIL is looking for a better deal than what GTL Infra paid for an overpriced Aircel deal - nearly $2 billion (approx Rs 9,000 crore) - for 17,500 towers last year.

GTL Infra's net loss widens to Rs 84 cr

The GTL spokesperson termed these developments as speculative and said that the company was currently focusing on the proposed CDR that is being worked out by the lenders. The sector has seen many telcos putting their expansion plans on hold, including BWA services, even after the 3G spectrum roll-out across the country late last year. However, RIL, the sole winner of the 20 MHz spectrum for all circles in the country during last year's BWA auction when it acquired 95 per cent stake of Infotel Broadband Services, wants to expedite its BWA plans.

Besides RIL, leading telco Bharti Airtel is understood to be planning to enter the BWA market by buying licenses from Qualcomm. The new telecom policy has now been delayed beyond its October rollout date. As a result, hardly any transactions are taking place in the telecom sector as uncertainty rules and banks are shying away from extending loans.

Besides, the telecom sector is under pressure due to the ongoing investigations over irregularities in the 2G spectrum allocation with 85 new telecom licenses facing the threat of cancellation. GTL Infra's net loss widened to Rs 83.95 crore for the quarter ended June 30, 2011, chiefly on account of interest and finance charges. A top official of a state-run bank said cases referred for CDR are on the rise. In July, nine new cases worth Rs 17,000 crore were referred for CDR, a bulk of it for GTL Infrastructure's nearly $2.5 billion (Rs 11,342 crore) worth of debt involving more than 20 banks.

CDR involves reorganisation of a company's outstanding obligations by reducing its debt burden through slashing the interest rates and increasing the payback time period for the company. According to a June 2011 Bank of America-Merrill Lynch report $33 billion (Rs 1.5 lakh crore) worth of shares of different firms have been pledged with banks as security. And founders of about 17 firms have pledged over 90 per cent of their holdings with these banks.

Courtesy: Mail Today