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Tatas may have to give up 25% stake in VSNL realty firm

Thomas K Thomas in New Delhi

The government will ask the Tatas to surrender 25 per cent stake in the company being created to administer the demerged land of 773.13 acres belonging to Videsh Sanchar Nigam Ltd.

According to officials in the ministry of communications, the Tatas will have to transfer 25 per cent stake in the new company to the government for free. This will be done through the issue of shares.

The government will thus hold the majority in the new company, with 52.97 per cent stake.

The American depository receipts-holders and other shareholders in VSNL will be holding proportionate shares in the company.

While ADRs account for 30 per cent of the equity in VSNL, 17 per cent is held by foreign institutional investors and the public.

It would be left to VSNL to draft the memorandum and articles of association of the resulting company and get them approved by the government.

DoT has moved a proposal towards this effect to the Telecom Commission. Prior to divesting 25 per cent stake in VSNL, the government had decided to demerge the surplus land from VSNL. Of the total 1,230.13 acres of land available with VSNL, 773.13 acres of land has been declared surplus.

The government is also of the opinion that using the name of VSNL in the name of the new company will enhance the latter's value.

A note submitted by the department of telecom to the Telecom Commission has suggested five names for the proposed company, including VSNL Estate Ltd, DoT Estate Ltd, VSNL-DoT Estate and VSNL-PKNC Estate Ltd, with PKNC standing for Pune, Kolkata, New Delhi and Chennai, where the surplus land is located.

In its recommendations to the Telecom Commission on May 30, DoT suggested that legal advice might be sought to decide whether the new company should be listed or not.

VSNL has recommended that the new firm, to be incorporated in Delhi, be listed because VSNL itself is a listed company on the New York Stock Exchange, and is governed by the US Securities Exchange Commission.

Dwelling on the process of creation of the company, DoT said valuers would be appointed to arrive at the fair value of the estate. After the company is registered, applications will be sent to the courts to convene separate meetings of the shareholders and creditors to consider the demerger.

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