Reliance Communications (RComm) on Sunday announced its intention to sell up to 26% stake in the company to a strategic investor or a private equity (PE) player. This comes amidst reports that the company, which is deep in debt, is in talks with overseas telecom players for a stake sale. Over the past few days, there have been reports of RComm being in talks with UAE?s Etisalat and South Africa-based MTN for a strategic stake sale.
If the firm offloads 26%, say at a 50% premium to the current price (given current market cap of around Rs 35,000 crore), the deal could fetch it about Rs 13,650 crore, according to analysts. On Friday, RComm shares closed at Rs 168, up 2.25%, on BSE.
RComm recently paid Rs 8,585 crore for 3G spectrum in 13 circles. The firm has already taken a debt of about Rs 20,000 crore. The net debt-to-Ebitda of Rcomm stands at a precarious 2.5 times. Add to this, the 3G spectrum fee and the ratio rises to a whopping 3.6 times. Combining Broadband Wireless Access (BWA) investment of up to Rs 3,000 crore, the company is estimated to need roughly Rs 12,000 crore for licence fee and rollout of services, considering it spends less than others on 3G.
The buzz around the stake sale started with the scrapping of a non-compete agreement signed between Anil Ambani and his brother Mukesh in 2006. With this, there are speculations that RComm may even try to revive talks with MTN.
In a media statement on Sunday, RComm said, ?The board of directors of Reliance Communications have approved in-principle the induction of strategic / private equity investors into the company for an upto 26% equity stake at an appropriate premium to the prevailing market price, and also to examine and pursue other appropriate strategic combination/consolidation opportunities.?
On June 2, in a statement to BSE, RComm had said it had received offers for a strategic stake.