Tata Unit's 15-Year Wait to Spin Off Land Assets Nears End

(Bloomberg) -- Tata Communications Ltd. will soon hive its property holdings into a separate company, which will subsequently be listed, capping a 15-year effort by the unit of India’s largest conglomerate.

The value of the company’s 773 acres of land parcels may be about 263 rupees ($4.08) per share, or about 75 billion rupees, according to ICICI Securities Ltd. The spinoff should take less than a few months as there is in-principle agreement among the parties involved, said Tata Communications Chief Executive Officer Vinod Kumar in an interview last week.

“Around the corner is probably a better description,” Kumar said in Guangzhou, on the sidelines of a conference. “The government is supportive and they are keen to do it. So it’s really paperwork.”

The company, which in October reported worse-than-estimated quarterly earnings, has been shedding non-core assets while bolstering its enterprise offerings. Analysts said that hiving off the property holdings should help its stock performance, which has trailed the benchmark gauge since early June and is near the bottom of a sectoral index.

Existing shareholders, including the Indian government, which holds 26 percent in Tata Communications, will get shares in the new listed entity. The new entity will receive land earmarked as surplus when Videsh Sanchar Nigam Ltd. was divested by the government in 2002 and sold to the Tata group.

“Any quick resolution in the land monetization process would be an upside,” Bhupendra Tiwary and Sameer Pardikar, analysts with ICICI Securities, wrote in a Nov. 2 note.

Tata Communications’s shares have dropped 6.5 percent in the past six months, while the benchmark S&P BSE Sensex has climbed 7 percent. Shares climbed Monday by 5.3 percent to 715.40 rupees.

The spinoff of its land parcels will be a “key catalyst” for the stock’s performance, according to an Oct. 26 note by brokerage Emkay Global Financial Services Ltd. The other big event would be “deal consummation” for Tata Teleservices Ltd.’s enterprise business, according to the report.

Tata Communications, which says it has the world’s largest wholly-owned submarine fiber network, is considering buying the enterprise business and fixed line assets of Tata Teleservices -- the debt-laden firm that sold its mobile-phone unit to Bharti Airtel Ltd. in October.

“We are doing the due diligence,” Kumar said, without disclosing any valuation. “It’s urgent because it’s a good opportunity. I hope we have a decision on it in the next three months.”

Tata Communications is looking to sell some more non-core assets after offloading two last year.

It sold 17 data centers for $633 million in May last year and Neotel Pty for $428 million, a month later, to free up funds and pare debt. Its total borrowings have shrunk to 88 billion rupees as of September-end from 142.3 billion rupees in March 2016, data compiled by Bloomberg show.

Its ATM business, housed in wholly-owned Indicash and generating $100 million in revenue, is being evaluated for sale. “We have done all the heavy lifting. That business needs investment to scale,” Kumar said. “So we have to decide do we invest here or somewhere else.”

--With assistance from George Smith Alexander

To contact Bloomberg News staff for this story: Rachel Chang in Shanghai at wchang98@bloomberg.net, Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net.

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Candice Zachariahs

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With assistance from Rachel Chang, Bhuma Shrivastava