Uninor has once again approached the Foreign Investment Promotion Board (FIPB) for an approval to pump money into the company by issuing fresh equity.
The company plans to invest R1,200 crore to finance its working capital requirements. Previously FIPB had approved a rights issue of R8,250 crore for Uninor that failed to take off largely due to differences with Telenor?s minority partner Unitech.
Uninor, whose 22 telecom licences across the country will become invalid on September 7 as per the directions of the Supreme Court judgment on February 2, has said that it needs the funds to finance its day-to-day operations.
When contacted the company spokesperson said, ?Uninor moved the FIPB in 2011 in relation to a rights issue, which is pending with the FIPB. Meanwhile, we continue to face a funding challenge in the absence of a full rights issue or any new bank loans and the continuing uncertainty and delays on the auction rules. Consequently, Uninor has sought to revive the FIPB approval process for a limited equity fund infusion to meet immediate funding needs. This amount will only suffice to serve its immediate funding needs for some parts of its operations?.
Interestingly, in the letter written to the FIPB on June 12, the company has asserted that the board members of its Indian JV partner, Unitech too have agreed to the proposal. It is interesting because, Unitech which is the minority partner with a 32.75% stake in Uninor has currently locked horns with the controlling partner Telenor over the valuation of the company and had bitterly opposed the previous offer of rights issue claiming it wasn’t in the interest of the minority shareholders.
?In this regard we wish to inform you that the nominee directors appointed by Unitech Ltd and its associates on board of Uninor have also consented to the rights offer on the board meeting of May 23, 2010,? the letter proceeds to say.
Unitech which in the past had staunchly opposed Telenor’s proposal for a rights issue seems to have approved this proposal for obvious reasons. In the wake of the Supreme Court judgment quashing Uninor’s telecom licences, external sources of funding, which Unitech always claimed were a better option rather than a rights issue preferred by Telenor, have now dried up. Leaving the company with no option but to fund its operations with internal accruals.
Telenor’s new proposal is expected to come up in the next FIPB meeting, the date for which is not yet finalised. In a rights issue, the equity shareholders are allowed to subscriber to the pro-rate portion of the fresh issue of equity.
Making case for a rights issue the company has written to FIPB, ?the proceeds of the rights offer would be used for operational; expenditure, working capital requirements and other expenses in the ordinary course of business and retiring of certain existing loans. The rights offer is proposed to be implemented in one or more tranches?.
Unitech’s grounds for refusing the rights issue earlier stemmed from its inability to subscribe to the proposed issue. In such as case while Telenor’s share holding in the company would go up till the FDI cap of 74%, Unitech’s stake would dilute to much lesser amount.
