The Department of Telecommunications (DoT) in consultation with the Finance Ministry plans to split the initial public offering involving 25 percent stake in telecom engineering and consultancy firm Telecommunications Consultants India Ltd (TCIL) into parts.
This will involve TCIL raising funds by issuing 10 percent fresh equity shares and the government divesting 15 percent of its equity in the company.
Sources said the 10 percent IPO may mobilize Rs 600 crore required to fund TCIL’s own expansion plans and for its US subsidiary. The government share sale may fetch around Rs 1,000 crore.
As per the initial plan, the TCIL issue may come up around the July-September quarter. DIPAM will also shortly call for a meeting on the appointment of a merchant banker for the proposed IPO.
The market offer of the telecom consultancy firm is part of the listing plan for six Central Public Sector Enterprises.
Sources said that DoT will soon move a cabinet note proposing the 25 percent stake sale. This stake sale will also involve the company issuing fresh equity shares to mobilize resources for its own requirement as TCIL is undertaking many telecoms and IT projects in India.
TCIL will use a provision called piggyback transactions of the disinvestment department, DIPAM. DIPAM rules say in case of issue of fresh equity in conjunction with the sale of the government stake (piggyback transactions) for listing, CCEA approval will be obtained by the ministry concerned — in this case, DoT.
Asked why the issue would go to the cabinet again given that the overall 25 percent stake sale already has cabinet approval, sources said the original cabinet approval was not for the 15 percent and 10 percent split of equity.
“We need the funds for our project, so we had to go for the split,” said the source.
Piggyback funding has already been done in Kochin Refinery earlier. In any case 25 percent is very high for listing. Normally equity sale for IPO happens for 10 -12 percent range. If the government is going for 15 percent stake sale, then give 10 percent to the company also which is struggling for cash.
TCIL has an order book of Rs 10,000 crore and it needs to give advance bank guarantees for executing the order. This requires funding support where the public offer will come handy.
So far Cabinet nod has been received for the overall 25 percent equity dilution not for the splitting of the IPO into 15 percent (for the government) and 10 percent (for TCIL), sources said.
TCIL is one of the six PSU whose IPOs are lined up next fiscal, as per DIPAM roadmap.
Sources said the company is banking on its JV with Bharti — Bharti-Hexacom — which operates in North East and Rajasthan for a higher valuation for its shares in the upcoming IPO.―Newsd