There is currently limited clarity on how GTL is going to fund this transaction. We believe the company would likely dilute its equity and also potentially raise further debt given its weaker balance sheet. In our view, a key risk to the RITL-GTL development remains on GTLs capability to fund this transaction, said a report by Goldman Sachs. Shares of RComm and GTL Infra on Monday closed at Rs 201.35 and Rs 47.15 on the Bombay Stock Exchange (BSE), up 4.60% and 3.97%, respectively.
GTL Infra is a loss-making mid cap entity. It reported a loss of Rs 2.67 crore for the financial year ended March 31, 2010, with revenues of Rs 347.95 crore. With the deal with Reliance Infra going through, GTL Infra will have to take a debt of about Rs 18,000 crore. However, we do not see that funding to be a problem for the company, said Rahul Gupta, senior manager, global wireless practice, Strategy Analytics India. Another option for the company would be to rope in a private equity player, he added.
Early this year, GTL acquired 17,500 towers from Aircel in a deal valued at $1.8 billion (approximately Rs 8,400 crore). As per GTL Infra, its net debt after Aircel transaction is Rs 7,400 crore with a debt to equity ratio of 1.2. It is currently operating at a margin of 54%. So the company has enough legroom to raise additional debt.
GTL Infrastructure is a passive telecom infrastructure provider with a market cap of about Rs 4,500 crore. Following the Aircel acquisition, GTL has around 32,500 towers. At the time of acquiring Aircel tower business, GTL Infra chairman Manoj Tirodkar had said, We expect to fund this transaction through fresh equity of Rs 3,400 crore; this could go up to Rs 4,000 crore. The balance 5,000 crore will come through debts funded by a consortium of banks syndicated by SBI Caps. Aircel has committed for 20,000 more towers in the near future.
Post the RITL and GTL transaction, the combined entity will have close to 82,000 towers, making it the largest independent tower company in India. RComm has said that the combined entity would have more than 12,5000 tenancies and potential to add another 75,000 tenancies.
One reason that RComm has gone for this deal is to get some relief on its existing Rs 33,000 crore debt. GTL Infra will have to fund the deal more by cash than equity. This is because raising equity for the deal will lead to substantial equity dilution for GTL shareholders. We expect a private equity player or another corporate investing into GTL Infra for making the deal a success, said a source.