RCom looks for 26 pc stake sale; may go for Infratel's IPO

As on March 31, 2010, RCom's total debt (excluding cash and cash equivalents) was Rs 24,856.95 crore, or USD 5.5 billion.

"We are considering options to raise equity resources in both RCom and our tower subsidiary, Reliance Infratel. We also have the possibility, if considered appropriate, of combining such a transaction with a possible IPO for tower business," Anil Ambani said at the company's sixth AGM here.

He said a combination of strategic and financial initiatives would result in large cash infusion into the company and significantly bring down debt levels in the next few quarters.

"Indeed, the company could potentially make us debt free in 3 years or so," he added.
The announcement to go for IPO for its tower subsidiary, Reliance Infratel, comes within days of RCom calling off the Rs 50,000 crore merger deal with another infrastructure firm GTL. The deal could have helped RCom reduce debt by about Rs 18,000 crore.

Reliance Infratel is also looking at public issue, offering 8.91 crore shares representing 10.05 per cent stake, to raise about Rs 5,000 crore.

On RCom, Ambani said it has the option of inviting minority equity participation of up to 26 per cent from financial and strategic investors.

"There is substantial interest in the market for such an offering given that we are now the only telecom operator in the country without a foreign partner," he said.
In June this year, RCom board had approved in-principle the induction of strategic/private equity investors into the company for an up to 26 per cent equity stake.

At the current price of RCom shares, Rs 171.85 a piece, it could garner over Rs 9,200 crore by selling 26 per cent.

On the fund raising plan for Reliance Infratel, Ambani said, "the company is in discussions with strategic and financial investors to unlock value, by creating a truly independent and operator-neutral tower company."

RCom has already invested in telecom infrastructure and assets in past five years, due to which, "starting this year, its capital expenditure cycle will dip dramatically", he said.

Rcom has spent nearly Rs 35,000 crore in capex in the last three years, and its investment this year is projected to be around Rs 3,000 crore. And this trend looks set to continue over the next few years.