Telecom minister A. Raja (right) with BSNL chairman Kuldeep Goyal (left) in New Delhi on Monday. Picture by Ramakant Kushwaha

New Delhi, Jan. 14: State-owned telecom firm Bharat Sanchar Nigam Limited (BSNL) is considering an initial public offering (IPO) to raise Rs 40,000 crore by diluting up to 10 per cent equity.

BSNL finance director S. D. Saxena said Rs 40,000 crore “can be a good size to test the market and this will also set the benchmark for going global.”

A sum of Rs 40,000 crore for 10 per cent equity means BSNL is valued at Rs 400,000 crore. Officials said the PSU was yet to decide whether the entire 10 per cent would be fresh equity or some of it would be the government’s share. The government now holds 100 per cent of the telecom giant’s equity.

“The government is considering selling shares in the company (BSNL) and will take a decision soon,” said A. Raja, telecom minister, without giving a time frame for the IPO.

BSNL’s maiden float could be the largest in the country, surpassing real estate company DLF, which raised Rs 9,190 crore last year, and Reliance Power, which is targeting Rs 11,700 crore from its IPO that opens tomorrow. Analysts said many companies were coming out with IPOs prior to BSNL. These firms might pick up bulk of the funds, meaning BSNL would find it hard to raise the money.

BSNL, which has about 70 million customers, offers landline and GSM services. During the financial year 2006-07, it clocked revenues of Rs 39,715 crore and a net profit of Rs 7,800 crore.

Saxena said the IPO exercise was likely to begin in the next two to three months and would be completed within a year. He, however, said the government would have to decide on the public issue. The government had sought BSNL’s opinion on the IPO and the company had forwarded its reply.

Spectrum norm

Raja today said the entity which first paid the licence fee to provide GSM cellular services would be the first to get spectrum.

“We cannot change the policy. We have given letters of intent (LoIs) to the eligible candidates in a very transparent manner,” Raja said.

“First, we have to scrutinise all the LoIs. Signing of licences is the next stage and then comes the distribution of spectrum,” he added.

BSNL will use part of the IPO proceeds to fund its CDMA plans.