Tulip plans Rs1,000 cr private equity funding

Tulip plans Rs1,000 cr private equity funding

New Delhi: Tulip Telecom Ltd, a Delhi-based data telecom and information technology services firm, plans to raise Rs1,000 crore from private equity (PE) funds and other sources.

“The company is looking to raise PE investment," a PE executive said, asking not to be identified. “However, the talks are yet to be finalized."

The board of Tulip Telecom, which is listed on the Bombay Stock Exchange and the National Stock Exchange, passed an enabling resolution about a month ago. Chairman and managing director Hardeep Singh Bedi confirmed Tulip is looking at PE funding, and may also raise the money through sale of commercial paper and in the bond market.

He, however, said the firm is not in immediate need of funds. “The enabling resolution has been passed to make sure all required permissions and approvals are there in case an opportunity arises."

Tulip reported revenue of Rs1,966 crore in the year ended March and a net profit of Rs275.5 crore.

A Mumbai-based analyst with a multinational brokerage said Tulip has debt of around $250 million (Rs1,112 crore). It could be raising the money to reduce that as well as fund acquisitions.

“This is a bit late for a PE to be investing in their firm as most usually get in at the capex (capital expenditure) stage," he said, requesting anonymity.

“But, the market is getting into the next stage of expansion and it is an assured medium-risk, medium-returns investment."

He added that the company has a healthy Ebitda (earnings before interest, tax, depreciation and amortization) margin —a measure of operating profitability—of 26-27%.

Tulip provides enterprise connectivity, network integration and data centre services, and competes with companies such as Bharti Airtel Ltd, Reliance Communications Ltd and Bharat Sanchar Nigam Ltd. Its clients include HDFC Bank Ltd, ICICI Bank Ltd, and Reliance Energy Ltd.

The firm plans to spread its wireless network infrastructure nationwide from the 2,000 towns and cities it is present in. It also wants to expand its fibre network beyond the 300 cities it already covers.

Bedi said Tulip’s expansion plans will depend on customer demand. “We are planning to invest between Rs.400 crore and Rs450 crore for the expansion," he said. The firm plans to fund the expansion through debt and internal accruals.

Independent communications consultant Girish Trivedi said the enterprise market in India is underserved and offers a higher investment-to-return ratio than the mobile business.

“This segment has a lot of potential as enterprises are doing a lot around data services and applications on the network," he said.


Shauvik Ghosh contributed to this story.