Ambani: Aiming high

Mumbai, Feb. 4: After mopping up over Rs 10,000 crore from the market with his Reliance Power IPO, Anil Ambani is planning another big-ticket flotation for his hived-off telecom tower business.

Reliance Infratel will offer over 8.91 crore shares, which will constitute 10.05 per cent of the post-issue paid-up capital. The tower company has 25,000 towers, which will be raised to 40,000 by the end of March.

Last week, ADAG chairman Anil Ambani had said his company would shovel Rs 8,000 crore into Reliance Infratel next fiscal to help it meet its capital expenditure targets.

Market sources said the issue would raise around Rs 5,000-6,000 crore, valuing the company at Rs 60,000 crore.

Last July, Ambani had divested a 5 per cent stake in Reliance Infratel at Rs 1,400 crore through a private placement, which valued the company at Rs 28,000 crore.

“Unlike in the West, mobile penetration in India is low. Telecom operators have a good scope to expand their operations and the sharing of towers is the best way to expand their reach,” said Harit Shah, telecom analyst at Angel Broking.

However, the move to list the tower subsidiary could be fraught with risks as the newly listed company would be heavily dependent on the performance and business of Reliance Communications (R-Com) as well as Reliance Telecom.

The company said its close association with R-Com could hinder its “ability to attract and service other third party operators as tenants”.

The risk factors listed in the red herring prospectus indicate that most of the assets that have been transferred to the tower company by R-Com “are secured in favour of R-Com’s creditors and they have not procured the release of this security”.

Reliance Infratel will import equipment at a lower duty of 5 per cent against 7.5 per cent under the Export Promotion Capital Goods Scheme. But to enjoy these benefits, it will be piggybacking on R-Com. The document says R-Com has no obligation to continue to allow Reliance Infratel these benefits and can withdraw them at any time.

The company admits that its profitability can be a little dicey as the strategy of hiving off tower businesses “has had only limited success elsewhere in the world and has not been successful in Asia”.

Promoter’s stake

After the issue, R-Com will indirectly own about 85 per cent of the total equity capital in the company. Last week, the finance ministry floated a discussion paper with the objective of forcing listed companies to ensure a public holding of at least 25 per cent.

Asked to comment on how the change might affect the shareholding pattern, an R-Com spokesperson declined comment.

Some experts said the valuation of the tower subsidiary was a little too high. “At Rs 60,000 crore, the company looks overvalued when you see that they have only 25,000 telecom towers,” an analyst said.

RPower listing

Reliance Power will list on the BSE and the NSE on February 11. The company has credited its shares to the demat accounts of successful allotees.