Fascel Offers Bpl 30 Per Cent Stake Held By Hindujas

Gujarat cellular licensee Fascel Ltd is negotiating with BPL group promoters, the Nambiar family, to offload a 30 per cent stake in the company. The stake is controlled by London-based NRIs, the Hindujas, through IndusInd Bank.

The talks, which started some weeks ago, are more than preliminary negotiations, sources said. The Hindujas, who bought the stake last year from Himachal Futuristic Communications Ltd (HFCL), have been looking for buyers for their stake for some months.

Fascel is also reported to have approached some other potential investors like domestic and foreign corporates. Some foreign equity funds have also expressed interest in the 30 per cent stake, sources say.

 

According to reports, the Hindujas-HFCL deal, structured as a debt-for-equity transaction, had valued Fascels Gujarat cellular project at $120 million (about Rs 432 crore).

This translated into a premium of 20 per cent over the companys equity of $100 million (Rs 360 crore). The Hindujas, say sources, want to offload the equity at a price higher than what they had paid for it. They are looking at a price in the range of Rs 130-140 crore for their 30 per cent stake (worth Rs 108 crore), a source said. Earlier, key executives in the group had confirmed that the NRI group was looking for buyers.

Valuations of cellular and basic telecom companies have risen some 25 per cent in the last few weeks, chiefly due to the sops offered to the sector in the 1997-98 budget, easing of external commercial borrowing norms, and the judgment of the Telecom Regulatory Authority of India quashing the hike in fixed-to-cellular call tariff by the department of telecommunications (DoT).

The valuation of a cellular or basic telecom company represents the price a buyer would be willing to pay for the business and is arrived at by discounting future cash flows.

The present value of future cash flows divided by equity capital gives the price per share. This price minus the face value of the share is the premium an investor would be willing to pay.

For the BPL group, the purchase of the Fascel stake makes strategic sense, because it would have a stake in the Gujarat cellular network, contiguous to its own network in the Maharashtra circle.

BPL-US West a 51:49 joint venture between BPL Cellular Holdings and the US regional Bell operating company is the cellular licensee for Tamil Nadu and Kerala apart from Maharashtra.

Holding licences for contiguous circles enhances the long-term profit potential of a cellular company, since it stands to garner a significant chunk of inter-circle long-distance call revenue generated in the sectors.

The department of telecommunications (DoT) is slated to review opening up of inter-circle long-distance call traffic to private providers in 1999 and is expected to deregulate the market.