Tata unit to hive property holdings into new entity

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 $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.
“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 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 monetisation process would be an upside,” Bhupendra Tiwary and Sameer Pardikar, analysts with ICICI Securities, wrote in a note.
Tata Communications’s shares have dropped 11.6
percent in the past six months, while the benchmark S&P
BSE Sensex has climbed
6.7 percent.
The spinoff of its land parcels will be a “key catalyst” for the stock’s performance, according to a 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 fibre 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.