From harbouring an ambition of creating India’s largest telecom towers firm by acquiring Reliance Communications’ (RCom) towers in 2010, Manoj Tirodkar, chairman of the loss-making and debt-laden GTL Infrastructure, is now looking to exit the beleaguered business altogether.
GTL Infra’s tower tenancy ratio of 1.50 is way lower than those of its competitors like Viom Networks’ 2.25, Bharti Infratel’s 1.93 and Indus Towers’ 2.0.
In 2011, Global Holding Corporation — the parent company of GTL Infra and GTL — approached the corporate debt restructuring (CDR) cell to recast its loan burden of R16,200 crore. Of this, the company has repaid R4,200 crore and owes banks around R13,000 crore (including principal and interest).
GTL’s lenders, however, say that they are unaware of any move to bring external investors on board.
“We have not been informed about the plans to find investors for the company but are not averse to the idea of a good strategic investor,” a public sector banker who is part of the CDR cell said. He declined to be identified. The banker added that they are generally informed of a potential investor only when a deal is close to being sealed.
Another banker said that it will be a challenge for Tirodkar to find a buyer given the group’s overall debt burden and policy flip-flops that the telecom sector is prone to. He too declined to be identified. “The competitive scenario with several operators owning their own towers and capital-intensive nature of the business also make it difficult to find suitable buyers,” the second banker said.
To put things in perspective, while the company’s current cash flows amount to around R1,200 crore a year, it has to shell out as much as R1,500 towards the payment of interest to lenders.
GTL Infra, which has about 30,000 towers in its portfolio, had accumulated losses to the tune of R1,831 crore at the end of FY14, according to Capitaline data.
GTL Infra posted a combined loss of Rs 415 crore in the first nine months of FY15, in line with the the net loss of R551 crore reported for the full 2013-14 fiscal. GTL had accumulated losses of R943 crore at the end of FY14.
The two companies reported a combined turnover of R2,844 crore in the 2014 fiscal.
Tirodkar, also the chairman of Global Holding, told FE that he was exploring various options to exit the telecom towers business and repay debtors.
He added he is in talks with at least three potential investors who have evinced interest in acquiring the group’s telecom towers and equipment business, though a deal is yet to be finalised.
“We are open to anyone buying us out as long as lenders’ and shareholders’ interests are protected.
I am willing to totally exit the company or remain in the management if the new investors so desire,” Tirodkar said. Promoters, led by Tirodkar, hold a 44.23% stake in GTL and a 27.04% stake in GTL Infrastructure.
Based on the closing price of GTL Infrastucture and GTL’s shares on the BSE on Monday, the promoters’ stake in these firms is valued at a total of Rs 240 crore.
The company, which has to pay around 11.5% interest on its restructured loans, has so far shed non-core assets to the tune of Rs 1,800 crore to generate funds to repay debt. These include divestment of its stake in GTL Urja, an Aurangabad-based power distribution franchisee for the Maharashtra State Electricity Distribution, and its engineering, procurement and construction business. The challenge for Tirodkar is that he is running out of non-core assets to sell and has to come up with alternative methods of generating liquidity.
More so because Tirodkar says that his company hasn’t borrowed any additional funds from banks since it entered into CDR in 2011 and doesn’t intend to do so in the future. Tirodkar’s confidence in finding an investor, he said, stems from the good response to the recent telecom spectrum auctions. Over the longer term the demand for telecom towers will increase significantly as companies look to widen their bouquet of services by adding more data-driven offerings.
“The benefits in the form of greater tower tenancy will flow in only after two to four years as operators will not be in a position to expand services immediately after spending huge sums on the spectrum auction. The auctions will give tower companies a boost in the long-term,” Tirodkar said. “Growth of data will drive enormous usage for towers and tower companies will benefit hugely.”
In September 2014, GTL Infra signed a telecom tower sharing deal with the Mukesh Ambani-led Reliance Jio Infocomm, which is following an asset-light strategy while rolling out its services.
Trouble began to brew at GTL infrastructure in 2010 after it entered into an agreement with Aircel to acquire 17,400 towers from the latter for Rs 8,062 crore. Aircel also agreed to take 20,000 slots on GTL Infra’s tower network on lease. But after investigations into alleged wrongdoings by the erstwhile UPA government in allocation of second-generation (2G) spectrum to telcos concluded, the Supreme Court cancelled 122 licences, including some awarded to Aircel. Simultaneously, slow offtake in demand for 3G services and a price war among Indian telcos took a toll on GTL’s earnings and derailed growth plans. Aircel also reduced its footprint in many of its service areas.
“Our major mistake was to make an acquisition (of Aircel’s towers) based on future cash flow projections for those assets, rather than on present cash flow at that time,” Tirodkar said. Had the deal with Aircel gone as per plan, it would have earned GTL Infrastructure around Rs 17,000 crore in revenues between 2010 and 2015, he said.
Instead, the company was forced to recognise provisions on account of doubtful debt on account of advances made to vendors, in connection with the Aircel transaction.
In 2010, GTL Infrastructure had sought to buy out the Anil Ambani-led RCom’s telecom towers, which would have made it the largest tower company in India at the time with an aggregate capacity of 80,000 towers. The deal, which was crucial for RCom to reduce its debt burden, eventually fell through.
