New Delhi: After years of trying to sell its 30% stake in Bharti Hexacom Ltd (BHL), a unit of Bharti Airtel Ltd, government-owned Telecommunications Consultants India Ltd (TCIL) has decided to defer the share sale.
“TCIL has intimated that the disinvestment committee of directors of TCIL considered the various factors, viz., the present performance of BHL; the future prospects and valuation being attractive due to induction of 3G and other technologies; attractive return of BHL on account of capital appreciation; and availability of limited buyers for TCIL’s stake and recommended deferring the process of exit from BHL,” TCIL said in a recent note to the department of disinvestment.
“So as it stands now, there is no proposal to offload the stake,” an official in the department of telecommunications (DoT) said requesting anonymity.
TCIL tried to offload the stake in BHL in open tenders twice earlier but failed. In the first attempt, it could not attract eligible buyers. In the second, last year, it received a few eligible offers but these valued the stake at far below the government’s expectation.
Five companies submitted technical bids last year. Of these, only Bharti Airtel and Punj Lloyd submitted financial bids in December.
In April, cabinet secretary K.M. Chandrasekhar wrote to TCIL asking to put the stake sale on hold and revisit the process. Chandrasekhar asked that the sale process be reviewed as some members of Parliament (MPs) and other interested persons had complained that the base price of Rs 1,700 crore set by consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd for the stake was too low.
TCIL has invested about Rs 105 crore in BHL since 1995.
Bharti Airtel recently offered to list BHL, which offers mobile services in six north-eastern states (excluding Assam) and Rajasthan, to provide an exit option to TCIL, its minority joint venture partner.
Bharti Enterprises spokesperson declined to comment.
BHL reported a net profit of about Rs 700 crore each in the past two fiscal years.
Bharti Airtel has the first right of refusal to buy TCIL’s stake in its subsidiary. But in March, the company took back its bid to buy the stake, complaining that the government was taking too long to complete the sale process.
“Looking at the gravity of the issues raised in the communications from the various MPs and the latest financial results of the JV, TCIL has been advised to revisit the issue of divestment afresh and, after making a threadbare analysis of the issues raised, to furnish a consolidated and conscious recommendation as to whether it would be appropriate for the government of India to go ahead with the sale of TCIL’s stake in Hexacom,” DoT said in an internal note in response to the cabinet secretary’s communication. The main reason TCIL wanted to exit the company was because Bharti Airtel refused to give a dividend.
In 2009, DoT had decided TCIL should exit BHL as Bharti Airtel constantly turned down requests for dividend payouts claiming the money was being used for network expansion.
“It’s unlikely that Bharti will give them a dividend soon but the value of the stake does have a very bright future for TCIL,” said a senior Mumbai-based analyst with a foreign brokerage, also requesting anonymity. “This is a positive for Bharti as the firm will not have any additional pressure on their balance sheet and will not have to go through all the hassles of compliance and so on. They should, however, look at acquiring the stake when their balance sheet is far stronger.”