The Hindu Business Line : Tatas, Reliance bid for VSNL

THE Government has received bids from the Tatas and the Reliance group for 25 per cent equity stake in Videsh Sanchar Nigam Ltd (VSNL), which has been slated for disinvestment this fiscal.

According to sources, the consortium led by Sterling Cellular Ltd, which had expressed interest in participating in the bid, however, opted out at the last minute. It had sought two more weeks from the Ministry of Disinvestment for putting in its bid, which was denied.

A final decision on the winning bid is to be taken by the Cabinet Committee on Disinvestment on February 5.

The Ministry of Disinvestment decided to invite financial bids for VSNL after the Delhi High Court rejected the petition by ModiCorp seeking a stay on the process.

It may be recalled that as many as six companies had expressed interest in acquiring VSNL, when the process was started in April 2001. However, over a period three of the potential bidders quit, leaving only Reliance, the Tatas and a consortium led by Sterling Cellular Ltd.

Currently, the Government holds 52.97 per cent stake in the company, which stands at Rs 285 crore. The ADR stock of the company comprises 29.22 per cent of the share capital and financial institutional investors hold 7.82 per cent, while public hold 1.97 per cent. Indian companies and financial institutions hold 6.78 per cent of the shares.

The sources noted that the Ministry had rushed ahead with the disinvestment process, as any delay would have seriously hampered the valuation of the company.

VSNL has already seen a dent in its valuation because of the decision to open up international long-distance services by April 2002, on very lenient entry conditions. What is more, with Internet telephony due to be allowed, VSNL could suffer a bigger dent.

Also, the two rounds of dividends of 500 per cent and 750 per cent, leading to depletion in cash reserves, announced by VSNL, are likely to lower its valuation.

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