If the asset stripping proposal is allowed to go through, it would set a very dangerous precedent for future disinvestment plans, a source close to communications and information technology minister Pramod Mahajan told FE, adding that the proposed investment could not be justified any which way. VSNL said it had received no communication from the government to this effect.
It was a day of crossed wires with claims and counter-claims flying thick and fast over the Tatas move to get VSNL to invest Rs 1,200 crore in their basic telephony company, Tata Teleservices.
While sources close to Mr Mahajan scoffed at the claim of a unanimous board decision saying that government nominee Rakesh Kumar had objected to the resolution, ministry of disinvestment officials maintained that there was no impropriety in the move. It is a clear case of asset-stripping, communications ministry officials maintained.
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On Wednesday, ministry of communications sources jumped to the defence of the governments lone director Rakesh Kumar who attended the board meet on Tuesday and poked holes in the arguments being put forth by VSNL management.
Official sources said that the VSNL board decision was not unanimous, a claim which flies in the face of what the VSNL management has been saying. Sources said that Mr Kumar had already written to the board of directors of VSNL denying that it was a unanimous decision and has put on record his opposition to it. When contacted, Mr Kumar claimed to be in a meeting and refused to comment on the issue.
While the Tatas maintain that the agenda was circulated a week in advance, official sources said that not only was the agenda circulated less than a week in advance, there was no mention of Tata Teleservices in the document. The board of directors was kept in the dark, they said.
While VSNL Board members claimed that they explored a host of investment options outside the Tata stable before zeroing in on Tata teleservices, official sources said that no options were explored.
The cash reserves with VSNL were left there for implementation of National Long Distance telephony services and other expansion plans, according to government officials. VSNL managing director, S K Gupta however said that all investmnet plans have been provided for and the current deciison does not impinge on any pre-announced investment plans.
In a desperate bid to come clean on the asset stripping accusation, Tata officials told media persons in Mumbai that the move was aimed at integrating VSNL into one comprehesive telecom entity which would be present in every segment of the value chain.
VSNLs managing director SK Gupta said that the company had been interested in entering the basic services segment. This happened before VSNL was disinvested and the government had not accepted our application since both BSNL and MTNL were in the market. VSNLs Director (Operations) N Srinath said with this investment, VSNL would cover all segments in the telecom arena.
TTLs total equity base currently stands at Rs 8250 crore. This consists of an equity portion of Rs 4325 crore coupled with Rs 3922 crore which is debt. The company has reported a loss of Rs 148 crore for FY01.
Responding to reporters questions on why the deal had been executed in such a hurry following the disinvestment of VSNL in favour of the Tatas and the subsequent open offer by th Tatas, Tata Industries managing director Kishor Chaukar said, VSNL had to make the investment while TTL shares were still available at par value. It may otherwise have come at a premium.
On the issue of whether the modalities for the investment had been carried out in a transparent manner, Mr Chaukar said, Whatever was done was done in line with the provisions of the Companies Act and the shareholders agreement. He added that all the directors were aware of the proceedings.
On the issue of the governments objection to the way the proceedings had ben carried out, Mr Chaukar said, We have had no official intimation from the government as yet.
When asked if the government could in any way revoke this decision, he said: Government as government is all powerful, it can stop anything it wants, but governemnt as a shareholder does not have the provisions under the Companies Act to do so. He added, Does the disinvestment process not envisage sovreignty of the board and the fiduciary responsibility of the board to take decisions on behalf of shareholders
Meanwhile, ministry of disinvestment (MoD) officials said there was nothing improper about the Rs 1,200-crore investment by Videsh Sanchar Nigam Ltd (VSNL) in Tata Teleservice Ltd.
Although disinvestment minister Arun Shourie refused to comment on communications minister Pramod Mahajans objection to VSNLs investment in Tata Teleservices, official sources said that MoD did not see any impropriety in the privatised telecom majors investment decision.
The MoD has scrupulously kept away from the controversy, having decided to speak on the issue only when its advice is solicited. Officials, however, said that the MoD feels that VSNL, like any other corporate body, is board-driven.
So, if the board has taken a decision on investment, it is not the governments business to question it, they said. In any case, the VSNL board includes nominees of the government, as it still holds 26per cent equity in it. In fact, the government is the largest shareholder in VSNL.
They said the government had a right and a duty to object to VSNL decisions if they violated the shareholders agreement. For instance, if the VSNL board takes a decision on asset-stripping, the government can and shall exercise its prerogative to veto the move, MoD officials said.