Ruias In Talks With Worldtel For Stake In Commvision
The Ruias-promoted Essar group is in talks with WorldTel the London-based telecom finance organisation to sell equity in Essar Commvision, the basic telecom services letter of intent holder in Punjab. The group controls 90 per cent of Essar Commvision equity and is willing to divest 30 per cent.
Sources said that talks with International Telecommunications Union- promoted Worldtel are stuck over the premium that Essar wants on the sale of equity. Essar Commvision executives were not available for comment.
The companys shares have been valued at Rs 14-15 per share by investment banks. The valuation of a project represents the price a buyer would be willing to pay for the business and is arrived at by discounting future cash flows. The valuation divided by equity capital of the project gives the price per share. This price minus the face value of the share is the premium an investor would be willing to pay.
It is not clear how WorldTel will exactly buy into Essar Commvision. The companys equity is owned by Essar Telecom (51 per cent); Asia Pacific Infrastructure Ltd (APIL), a Mauritius-registered special purpose vehicle (SPV) owned by the Ruias (39 per cent); and Bell Atlantic of the US (10 per cent).
The Essar group had restructured the equity-holding in Essar Commvision last year. The Mauritian SPV was floated to ease the process of hawking equity to foreign investors. Companies registered in Mauritius do not pay income-tax and have virtually no ownership restrictions. The Essar group top brass was reported to be in negotiations with telecom firms like Veba of Germany and the CP group of Thailand. It was also talking to Bell Atlantic to hike its stake in the company. This is the first time that the group is negotiating with a financial investor (Worldtel).
If talks with Worldtel are concluded, then the deal would be worth between Rs 500 crore ($140 million) and Rs 700 crore ($195 million).
Essar Commvision has drawn up an ambitious Rs 3,600 crore ($1 billion) project for providing basic telecom services in Punjab. This plan is structured on a Rs 1,260 crore ($350 million) equity base.
Another Rs 1,260 crore ($350 million) will be raised through external commercial borrowings (ECB) and the remaining Rs 1,080 crore ($300 million) from a combination of rupee debt and franchisee deposits.
Essar Commvision plans to appoint franchisees in different districts of Punjab to handle billing, customer care and maintenance of the local loop. A WorldTel investment proposal of about Rs 7,200 crore ($2 billion) is pending with the department of telecommunications (DoT). The proposal envisages developing of basic telecom networks in Uttar Pradesh (East), West Bengal and Kerala.