Mumbai: A stake sale in GTL Infrastructure Ltd could see the telecom infrastructure firm valued at more than Rs11,000 crore, two people aware of the development said.
The company is likely to be valued at about 11 times its current ebitda (earnings before interest, tax, depreciation and amortization), the people said on condition of anonymity.
The stake sale process, which began last month, is benchmarked around the valuation of recent deals in the telecom space as well as the improved tower tenancy ratios of the company’s 28,000-odd mobile towers, after several years of revenue and tenancy decline because of cancellation of telecom licences and intermittent freezes on capital expenditure by telecom operators, the people cited above said.
In FY17, GTL Infra and Chennai Network Infrastructure Ltd (CNIL)—a unit of Global Group, which also owns GTL Infra— reported a combined revenue of Rs2,286.05 crore against Rs2,145.51 crore in the previous year. For 2016-17, the company has also increased its total tenancy to 50,845 from 40,261 in 2015-16.
The stake sale, which is part of the company’s strategic debt restructuring (SDR) process invoked by its lenders in September, could also see GTL Infra founder and chairman Manoj Tirodkar’s Global Group completely exit the company he founded in 2004. As per the latest corporate filings, Global Group is currently left with a stake of close to 22% in the merged entities of GTL Infra and CNIL, which houses around 17,500 towers acquired from Aircel Ltd in 2010. The merger was approved by the boards of both companies in April.
As part of the SDR process, a consortium of state-run banks have converted the company’s outstanding loans worth Rs4,492 crore into equity.
The lenders who currently own more than 51% stake will have to sell at least 26% of their holdings to a new buyer by next year for the SDR process to succeed. Under Reserve Bank of India guidelines, the conversion of debt to equity under SDR should happen within 210 days of the review and reference date, and the induction of a new investor should take place within 18 months from the date.
While an email query sent to Union Bank of India, which is among GTL Infra’s largest shareholders, remained unanswered, people cited above maintained that the lenders are yet to take a final decision on Tirodkar’s proposal. The proceeds of the fund-raising by GTL Infra promoters is expected to be used for repaying the outstanding debt of GTL Ltd, another group company which too has unpaid debt of upwards of Rs6,000 crore, said the first person cited above.
“There are common lenders in both GTL Infra Ltd and GTL Ltd and it may be in the interest of the lenders to give an exit to Tirodkar. Once lenders sell their 26% stake, they will be in a position to wait longer to sell their remaining stake, possibly at a better valuation." said the second person cited above.
The Financial Express reported in April that GTL Ltd is in talks with lenders for a one-time settlement.
“The SDR rules stipulate lenders to sell at least 26%, however, to enhance shareholder value and enable the lenders and minority shareholders to unlock better value of their investments, should it be required, promoters are willing to participate in the consolidation process," a spokesperson for GTL Infra said in response to a query on Global Group’s plan to exit GTL Infra.
GTL Infra has hired New York-based Tap Advisors, a telecom sector focussed M&A advisory firm, to widen the reach of the auction process which is being managed by EY.
“We at GTL Infra is committed to grow the business and deliver on our promise to lenders to fulfil SDR obligation by finding investors for lender’s stake sale in 18 months as stipulated by SDR guidelines," said a GTL Infra spokesperson.
Tower companies across the world have converted themselves into REITs because they have assets on the ground and are assured of long-term annuity income.
We believe that REITs, strategic tower players and other global investors could be interested in our tower assets, accordingly TAP Advisors have been appointed to assist the company and EY to discover a price, bring quality global buyers to the table and strengthen the investor induction process" a GTL Infra spokesperson said.