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    VSNL’s 773 acres to land in hemisphere, Government mulls 26% stake sale in Tata Communications

    Synopsis

    The government may also, over time, sell its 26% stake in Tata Communications, earlier known as Videsh Sanchar Nigam Ltd (VSNL), after the deal.

    ET Bureau
    NEW DELHI | MUMBAI : The government and Tata Communications are close to settling a 15-year old real estate dispute through a deal that will see around 773 acres of land worth Rs 10,000-15,000 crore hived off into a separate company and sold.

    The government may also, over time, sell its 26% stake in Tata Communications, earlier known as Videsh Sanchar Nigam Ltd (VSNL), after the deal. The move is set to give the Internet and fibreproviding arm of the Tata Group more flexibility in its operations, especially by being able to raise equity — which it hasn’t been able to due to the government holding — and improve its debt-equity ratio. Two senior telecom department officials said that talks are in their final stages. Once completed, the scheme of arrangement will be filed with the National Company Law Tribunal (NCLT) and then sent for approval to cabinet.

    “We’re working on the final stages. We want to finish the process as quickly as we can, after which it will go to NCLT, which will again take about three to four months,” one of the officials said. “The surplus land demerger is a priority and all the stakeholders involved are working in earnest towards the finalisation of the same,” said a Tata Communications spokesperson.

    The government and Tata will transfer the land assets after the demerger to Hemisphere Properties (HPIL), in which the government holds a 51% share, the second official said.

    Both parties have been seeking to work out a deal over the past year and want to complete it by March 2018, said the people cited above. Land demarcations have concluded at three locations in Delhi, Kolkata and Chennai and are nearing completion at two in Delhi and Pune, the second official said.

    Tata Comm Stock up 13% in a Month
    “The company is currently actively working with the GoI (government of India), Panatone and HPIL to finalise the scheme of demerger and expects that the same shall be finalised sometime in the near future,” the company had said in its FY17 annual report.

    The Tata group holds a stake of nearly 49% in Tata Communications through Panatone Finvest Ltd, an investment arm that holds over 30%, Tata Sons and Tata Power. According to a recent Morgan Stanley report, the potential beneficiaries of the property separation include the government (51%), minority holders who sold their stake to Tata in an open offer in 2002 (25%), and existing minority shareholders (24%). This last group include Life Insurance Corp. of India (LIC), Government Pension Fund Global, Baron Emerging Markets Fund and Amansa Holdings Pvt. Ltd.

    Image article boday


    According to sources, the Tata group is expected to hold a 3-4% stake in the landholding company. It didn’t comment on its holding in this entity.

    The Tata Communications stock, which has risen nearly 13% in the past month, ended at Rs 707.50, up by 0.31%, on the Bombay Stock Exchange on Friday. Analysts at Morgan Stanley attributed the surge to the expectations of a settlement on the land. The Tata group acquired a 45% stake in VSNL in 2002 in two transactions — 25% from the government and 20% from shareholders via the open offer.

    As part of the divestment process, the government divided VSNL’s 1,500 acre landholding into two parts — one stayed with the telecom operator and the other went to what eventually became Hemisphere Properties in 2005-06.

    While the Tata group has over time consolidated its control over VSNL, it had to sign away rights to the surplus land holdings. The brokerage firm said the settlement will benefit minority shareholders. “We value the land at Rs189/share in our bull case and believe this event is a positive catalyst for the stock,” it said.

    Chances of a deal improved last year when the Lok Sabha gave its assent to the Taxation Laws (Amendment) Bill, which exempts asset sales by public sector companies from capital gains tax. This ensured there would be no capital gains tax levied on the transfer of the land for development.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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