Tata Communications to raise $1bn

Tata Communications, the country's largest, long-distance telephony company, plans to raise $1 billion (Rs 4,000 crore) to partly fund its expansion plans for the next three years. It has already approached banks to raise $350 million within a month.

In February, the company, formerly known as Videsh Sanchar Nigam (VSNL), said that it would spend $2 billion in the next three years to complete additional submarine cable systems connecting emerging markets across the world and for its WiMax services.

Then the company had declared it would fund its expansion through internal accruals and borrowings, but the details were not given.

"The company is expecting to get $1 billion through internal accruals and the remaining $1 billion to be raised in three years," said an investment banking source familiar with the development.

Bank of America is one of the banks working out the mandate for raising $350 million for the first year of the three-year expansion plan. "With the credit market getting tighter, banks are advising the company to raise funds through the equity route," said the investment banking source.

The company has options such as foreign currency convertible bonds, qualified institutional placement or dilution of stake in one of its subsidiaries.

In March 2007, the company announced the setting up of a separate subsidiary for its broadband and internet services for retail customers, the process for which is under way.

"The sale of a minority stake in this subsidiary to raise fund for the expansion of the parent company is one of the options available," said the banker.

The company did not divulge any details on the fund raising plan. "Tata Communications continuously evaluates various options for fund raising to support its global investment plans," said a company spokesperson in an e-mailed response.

"The company cannot comment on any specific plans at this point of time," he added.