A consortium of investors who picked up a 5% in Reliance Infratel at a very high valuation in 2007, and the company?s debt sponsors could emerge as a hurdle in the proposed merger of the company with GTL Infrastructure, bankers close to the deal said. This could also make the deal extremely complex, and delay it by a few weeks to a month, they said. Reliance Infratel is the telecom tower arm of Reliance Communications (RComm).
?Before the merger, the firm needs to take an approval from the debt sponsors as well as the investors, which could be a hurdle, considering that investors paid heavily when they bought stake in the firm,? the source said.
In 2007, a consortium of investors bought a 5% stake in Reliance Infratel at a valuation of about $6,43,000 (Rs 257 lakh) per tower for 14,000 towers. However, with the decreasing valuations of the towers, investment bankers expect the current deal to be in the range of $100,000 or Rs 45-50 lakh per tower for around 50,000 towers with a tenancy ratio of about 2. This is expected to be similar to the valuations of the Tata Teleservices (Maharashtra) and Quippo-Wireless TT Info Services deal (around Rs 52 lakhs per tower) and GTL -Aircel deal (Rs 48 lakh per tower).
Investors in the consortium include HSBC Daisy Investments (Mauritius) Limited, GLG Emerging Markets Special Situations Fund, Drawbridge Towers Limited, Reliance ADA Group Trustees Private Limited, Galleon Technology Offshore Limited, Investment Partners B (Mauritius) Limited and Quantum (M) Limited as per the draft red herring prospectus (DRHP) filed by Reliance Infratel in September 2009.
RComm had a net debt of Rs 19,889 crore at end of March’ 10, which increased to around Rs 30,000 crore after the recently concluded 3G auctions. According to the DRHP, Reliance Infratel, in which RComm and its promoted companies hold 95% stake, had an unsecured loans of about Rs 15,000 crore at the end of March 2009. If the deal goes through, it would help RComm reduce its debt and Anil Ambani could hold a stake of about 26% to 33% in the tower company, various media reports said. Both, RComm and GTL refused to comment for the story.
Considering GTL Infrastructure would hold a management control and about 33% stake in the company, it could pay a premium of about 30% for the deal, taking the total deal value to around Rs 11,000 crore to Rs 12,000 crore. It would also be tough call for GTL Infrastructure that recently bought 17,500 towers for Rs 8,400 crore from Aircel. GTL Infrastructure already has a debt of about Rs 4470 crore at the end of March 2010, with a debt to equity ratio of about 2.3. An additional investment in Reliance Infratel would mean GTL would need participation from external financial investors, which could also stretch its balance sheet.