New Delhi: Public sector telecom equipment firm Indian Telephone Industries Ltd (ITI) will get financial aid from the government to help it invest in at least three new undertakings—either joint venture companies (JVCs) or special purpose vehicles (SPVs)—even as a senior telecom official said that there is no plan to sell a stake in the ailing company.
ITI has called for expressions of interest from consultants to help it form the new spin-off ventures. The public sector firm will own between 26% and 49% of these entities. “The strategic partner is to have controlling stake in the SPV/JVC with equity participation in the range of 51-74%,” says a notice on the ITI website. The top management of ITI could not be reached for this story.
The Bangalore-based firm plans to partner with Indian or global telecom equipment makers who want roll out products at three of ITI’s six manufacturing plants in Rae Bareli, Naini and Bangalore. ITI also has units in Palakkad, Srinagar and Mankapur.
ITI has battled huge losses and has survived on a quota system which mandates that government-owned firms give at least a quarter of their equipment orders to ITI.
State-owned telecom services provider Bharat Sanchar Nigam Ltd (BSNL) is ITI’s largest customer. Other customers include state-owned defence, railways and oil firms.
ITI is one of India’s oldest public sector units. Losses in 2008-09 were Rs635.52 crore on the highest revenue in seven years, Rs1,788.3 crore. The firm’s cumulative losses are an estimated Rs2,500 crore.
ITI has been struggling to keep up with multinational competitors such as Ericsson India Pvt. Ltd, Alcatel-Lucent, Nokia Siemens Networks Pvt. Ltd and Huawei Telecommunications India Pvt. Ltd.
In January, the cabinet cleared an interest-free loan of Rs125 crore so ITI could pay salaries to its 13,000 employees. “We are only looking for investors in the company. We are not going to sell any stake or anything,” Siddhartha Behura, secretary in the department of telecom, said. He did not specify how much the government would invest in ITI.
“The formation of a joint venture allows for lower capital expenditure and many other cost savings which is one of the main reasons why they are going in for it,” Kevin Trindade, an analyst with Kisan Ratilal Choksey Shares and Securities Pvt. Ltd, said. The department of telecom has no plan to merge ITI and BSNL.
“There will not be any merger with BSNL,” Behura added.
“The merger would have led to many savings including transaction costs and manpower costs,” a senior official with BSNL said on condition of anonymity as he is not authorized to speak to the media. “But there were many employee related issues like the pension of old employees of ITI and many of the present employees are on deputation from the central and state governments,” he added.
ITI shares closed on the Bombay Stock Exchange at Rs43.20, up Rs2.05 or 4.98% on Thursday. India’s benchmark Sensex index was up 0.9%.