Tata Teleservices, which transferred its wireless services business to Bharti Airtel in October last year for free, has reported India Inc’s biggest loss ever at Rs 274.7 billion for the fiscal year ended March 2018 — due to write-offs taken on its wireless service business.
The company’s net worth stood eroded at a negative Rs 452 billion in the same period as Tata Group Chairman N Chandrasekaran sets the house in order. Bankers privy to the development said despite the huge losses, the company has paid all its loans on time. There was not a single default.
Rival Reliance Communications reported the second-biggest loss in corporate history at Rs 239 billion for 2017-18 as the Anil Ambani-run company shut down its wireless telephony business and sold telecom infrastructure to Reliance Jio for Rs 240 billion.
“The arrival of Jio and intense competition thereafter sent the marginal players out of the market. The profit of the entire Indian telecom sector fell like a house of cards,” said a banker asking not to be named.
For 2017-18, Tata Teleservices’ net sales were Rs 69.4 billion, compared to Rs 120 billion reported in the previous year as a sizeable chunk of its business was transferred. The company’s operational losses were at Rs 6.56 billion in 2017-18, but after exceptional items, its losses shot up to a massive Rs 274 billion.
Tata Teleservices had announced it would look at merging its enterprise business with Tata Communications, but the transaction has still not received approval from the Indian government which owns 26 per cent stake in Tata Communications. Early this year, former Tata Sons official Mukund Rajan, backed by private equity firm TPG, even offered $1 billion to take over the enterprise business of Tata Teleservices, which was not accepted by the Tatas.
Soon after he was removed in October 2016, former Tata group chairman Cyrus Mistry had warned that if Tata Teleservices were to shut down, the group would have to take a huge write-down. Besides, Tata Teleservices promoter Tata Sons had to pay $1.18 billion to DoCoMo to buy back its 26.5 per cent stake in Tata Teleservices as a 2009 agreement between the two companies.
As the Tata company was unable to repay its loans, Tata Sons infused more money into the telecom company so that it could clear its debts in 2017-18.
Tata Teleservices was set up in 1995 with Tata Sons Ltd currently holding 70.4 per cent stake as on June 15, 2018, while the rest is owned by other Tata companies.
In June this year, Tata Sons raised $1.5 billion from international markets to pay off loans of Tata Teleservices. This will be for the first time since 2007 that Tata Sons was tapping the international markets to raise funds. An email sent to Tata Teleservices did not elicit any response. – Business Standard