Reliance Communication unit gets 'in principle' nod from Singapore stock exchange for IPO
Demand for cars in India fell for the first time in three years last July as high interest rates and rising fuel costs deterred buyers.
The undersea cable unit of Reliance Communications has received "in principle" approval from the Singapore stock exchange for its about $1.4 billion share sale, said a source with direct knowledge of the deal, paving the way for Asia's biggest IPO this year.
The unit of Reliance Communications will be listed on the Singapore exchange as a business trust and the proceeds will be used to reduce the debt of the parent, the source said, declining to be named as details are not public yet.
A successful offering by the unit, which operates one of the world's largest private undersea cable networks, will be a major relief for beleaguered Reliance Communications which has seen its fair share of failed deals.
India's No.2 mobile operator, controlled by billionaire Anil Ambani, is struggling with $6.9 billion in debt and has posted 10 consecutive quarters of profit decline amid fierce competition.
Reliance Communications said in a statement on Tuesday it was evaluating an IPO in Singapore of its undersea cable unit through a business trust. A spokesman for the company declined to elaborate. A spokesman for the Singapore exchange also declined to comment.
Formal approval of the Singapore exchange for the unit's listing is expected over the next few days, two sources said.
The IPO, which will be the biggest in Asia this year ahead of China Communications Construction's $794 million Shanghai IPO and Tesco's $600 million fund listing in Thailand, could be launched this quarter, said the source.
Proceeds from the listing of the unit will be about Rs 70 billion, said the source.
Reliance Communications plans to sell 75 per cent of the wholly owned unit in the offer, sources have said earlier.
Listing through the business trust route will help Reliance Communications to publicly float a large chunk of its shares without changes in management ownership, said another source with direct knowledge of the situation.
"The company needs money to pay off as much debt as they can and in this scenario listing through business trust makes sense rather than selling about 10 to 20 per cent through the traditional IPO route," the source said.
The unit will start approaching cornerstone investors for the IPO starting this week, the source said.
OUTPERFORMING MARKET
By listing in Singapore, the unit can also take advantage of some of the most attractive rules for listing a business trust. Business trusts contain assets that pay regular dividends, most of which are distributed to shareholders.
Successful deals have been few and far between for Reliance Communications. A hoped-for IPO of its telecoms tower unit failed to take off and a planned sale of the business has dragged on for nearly two years
The mobile operator was forced to tap Chinese banks earlier this year for loans to repay about $1.2 billion in overseas convertible bonds that were due for redemption last month.
The undersea cable unit has hired Deutsche Bank, Standard Chartered, DBS and Industrial and Commercial Bank of China as advisers for the public offering of shares.
The unit had 386 customers at the end of December that include internet service providers and mobile carriers. Its operations covers six of the eight major global data traffic routes and nine data centres, the company's website showed.
Shares in Reliance Communications, valued by the market at $3.4 billion, were trading 0.7 per cent higher at 83.55 rupees at 01:22 pm, while the broader Mumbai market was slightly lower. The stock is up more than 19 percent in 2012, outperforming a 13 per cent rise in the broader market.
Copyright @ Thomson Reuters 2012
Copyright @ Thomson Reuters 2012