TCIL starts process of Bharti Hexacom exit2 min read . Updated: 22 Oct 2013, 12:28 AM IST
TCIL has issued a request for proposals for appointing a consultant to help it sell the stake
TCIL has issued a request for proposals for appointing a consultant to help it sell the stake, according to two people familiar with the development. It expects to appoint the consultant by end-November,
according to a company executive and a senior department of telecommunications official. They declined to be named.
Bharti Hexacom offers telecom services in Rajasthan and the North-East to around 18 million subscribers, or around 10% of Bharti Airtel Ltd’s 191 million total subscriber base, according to Telecom Regulatory Authority of India data at the end of July.
Bharti acquired more than 68% in Hexacom India Ltd in 2004. The stake was later increased to 70% after Bharti acquired 1.11% from a Kuwait-based telecom company. Bhari Airtel declined to comment on TCIL’s stake sale.
TCIL has been looking to sell its stake for a number of years as Bharti had declined to pay a dividend to the state-run company despite Hexacom being profitable and debt-free.
Bharti said the profits of the company were invested back to allow it to compete successfully in the highly competitive Indian telecom market. Mint had reported in December 2011 that Bharti had agreed to pay TCIL nearly ₹ 12 crore as interim dividend for the financial year 2011-12. It is unclear if a dividend will be paid in the current fiscal.
In 2010, the government invited bids to sell TCIL’s 30% stake in Hexacom with a base price of ₹ 1,800 crore. But the sale process was put on hold in May 2011 as the cabinet secretary wanted to review the base price following complaints that it was too low.
Bharti Hexacom had revenue of more than ₹ 1,700 crore and a profit exceeding ₹ 400 crore in 2010. TCIL has invested around ₹ 100 crore in Hexacom since 1995, when the company was incorporated.
In 1995, TCIL attempted to sell the stake but failed as it got an offer of ₹ 251 crore from Bhari Airtel compared with the reserve price of ₹ 521 crore.
The move to hire consultants comes after the Telecom Commission, India’s primary telecom policy decision-making body, asked TCIL to find a fair value for the stake last month. The government’s plans to sell a 10% stake in TCIL has also been shelved because of poor market conditions.
A telecom analyst at a Mumbai-based brokerage said the stake could be valued at around ₹ 1,500 crore. He declined to be named as he is not authorized to speak to the media.