Ambani plans to boost stakes in RComm
Mumbai, September 28, 2011
Indian billionaire Anil Ambani plans to increase his stake in Reliance Communications as the debt-laden telecoms company founded by his family edges towards a sale of its phone tower unit after a year of trying.
Reliance Comm has hired UBS and sought $5 billion for its 95 per cent stake in its Reliance Infratel tower unit, sources in August, as the country's No 2 mobile phone carrier by subscribers struggles with its more than $7 billion net debt.
But potential bidders had expressed concern about Reliance's valuation being at least $1 billion too high, the sources had said.
'When we hopefully conclude the Reliance Infratel transaction, it will be the largest private equity transaction in the history of this country,' Ambani, India's eighth richest man according to Forbes, told a packed annual meeting of shareholders on Tuesday.
Sources had previously said UBS had reached out to US companies American Tower and Crown Castle International, India's Viom Networks and UAE's Etisalat on the tower sale.
The bank had also contacted private-equity firms Carlyle, Apax Partners and Blackstone, the sources said.
Reliance Communications is battling amid a fast-growing but ferociously competitive Indian cellular market as low call prices and high operational costs squeeze margins.
Eight straight quarters of falling profits and failed attempts to raise cash are eroding investor confidence in the company, whose stock has lost 44 per cent of its value so far this year, leaving the company valued at $3.4 billion.
Seeking to boost confidence in the company, Ambani said Reliance Comm's founders - largely himself, his family and companies controlled by him - would raise their stake in the company to 75 per cent, from 67.9 per cent at the end of June, without giving a time frame.
'The market valuation is very low, and there is every reason for the promoter to raise stake in his company,' said Manish Sonthalia, a fund manager at Motilal Oswal Asset Management.
'It is also an indication to the market that the stock is undervalued, and rightly so. Even at replacement cost, Reliance Comm is certainly worth more than this,' he said.-Reuters