Bharti Airtel?s foray into Africa through the buyout of Zain, which it completed in mid-2010, is taking far longer to pay off than anticipated. Operating profits haven?t moved out of the $275-300 million range for more than nine quarters now, despite a fall in interconnect costs, and Q1FY15 saw ebitda margins declining sequentially by 100 basis points to a multi-quarter low of 24.3%. Even as it waits for the wireless business to pick up, the telco is doing the sensible thing by selling off assets?after it sold 3,100 towers across four countries to Helios, it has now offloaded another 3,500 to Eaton Towers. The sale is expected to fetch Bharti an estimated $500-600 million or thereabouts. While this is certainly not an amount that will meaningfully reduce the $11 billion of debt on the firm?s books, it would, nonetheless, lower interest costs and save the company some capital expenditure.
Looking back, it would appear that many of the overseas acquisitions, made by Indian firms over the past decade, haven?t turned out as expected. Among the larger buyouts, Tata Steel?s buyout of Corus has been a near-disaster with the company having had to mothball some of the capacity and take an impairment charge
of R8,356 crore. Tata Chemicals, too, has needed to write down
R924 crore for its African operations. To be sure, there have been several success stories?the most visible being Tata Motors? acquisition of JLR?but by and large, most takeovers haven?t brought in the expected synergies. Selling out to cut losses is one way out?
Indian Hotels, for instance has been trying to sell off properties for which it paid top dollar while GMR Infra has been able to monetise some of the stakes that it picked up in overseas businesses. Given they are weighed down by debt and unable to access cheap and plentiful funding, as they were before the global financial meltdown, companies will need to resort to more asset sales. It is a pity though that Indian companies aren?t scouting for assets at a time when valuations are more sane than they were in 2008.