Tata Teleservices to require Rs 2,000 cr by next financial year

Tata Sons has already invested close to Rs 4,500 cr in the past few years

Tata Teleservices, the loss-making venture of the Tata group, would require fresh infusion of funds of approximately Rs 2,000 crore from promoters in the next fiscal to keep its operations going, say bankers. Tata Sons, which is in the midst of a legal battle between its former Chairman Cyrus Mistry and Ratan Tata, would have to shell out a lion’s share of the fresh fund infusion as the company’s main promoter.
 
Tata Sons has already invested close to Rs 4,500 crore in the last few years to keep the company afloat and helped it bid for spectrum. An additional funding for Tata Teleservices would be a double whammy for Tata Sons as it has already deposited $1.2 billion with the Delhi High Court last year as penalty to NTT DoCoMo by an arbitration court in London. DoCoMo had won an award to make Tata Sons buy back its 26.5 per cent stake in Tata Teleservices as per a 2009 agreement. If Delhi HC gives an order in favour of DoCoMo, the group will lose the funds currently deposited with the court.
 
With a new leadership in place at Tata Sons, bankers said the fund infusion in Tata Teleservices would be critical for the company to fight cutthroat competition from Reliance Jio and from other three large players — Bharti Airtel, Vodafone and Idea Cellular. Though Tata Teleservices initiated talks with Vodafone for a possible merger, the talks did not make any headway as the British telecom giant wanted to focus on its possible initial public offering.
 
The company is already facing multiple issues including the ongoing litigation related to 2G dual technology, delisting of Tata Tele Maharashtra Ltd, contingent liability of several thousand crores with respect to the contracts entered with Viom, and outstanding litigation with DoCoMo. This would come in the way of closing any deal with a rival for a merger. Making things worse, the non-disclosure of the put option in the DoCoMo transaction to the FIPB has been interpreted as a default by Tata Sons and Docomo, according to a petition filed by Mistry with the National Company Law Tribunal. 
 
One of the options on table was to file for bankruptcy by the company but this was ruled out by the Tata group due to reputational damage to the conglomerate as well as negative reaction from banks, as per Mistry’s petition.
 
The only silver lining was that the company’s earnings before interest, tax, depreciation and amortisation (Ebitda) improved from Rs 700 crore three years ago to Rs 2,400 crore.
 
This is still not enough to take the company out of the woods where the Tata group has invested Rs 35,000 crore.