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Unitech goes to FIPB to block Uninor rights issue

Thomas K. Thomas
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The spat between Unitech Ltd and Norway’s Telenor has escalated with the former blocking a proposed rights issue by Uninor. Unitech Ltd has written to the Foreign Investment Promotion Board that its nominees on Uninor’s board had not given their consent for the rights issue.

It also alleged that the rights issue was an indirect attempt by the Nordic company to bring in a new partner into the venture.

Uninor, in which Telenor owns 67.25 per cent stake, had approached the FIPB, seeking to bring in Rs 1,200 crore as part of a rights issue. The cash-strapped company wants to use the additional funding for meeting operational expenses.

Agreement ‘breached’

But Unitech has told the FIPB that the rights issue was already under arbitration. “Telenor breached the shareholders’ agreement by not fully exploring the possibility of obtaining long-term project finance,” Unitech said, adding that it was not clear as to how the Norwegian firm would infuse funds without breaching the 74 per cent FDI cap.

“Unitech has already informed Telenor that it will not subscribe to a rights offer. Therefore, the rights issue is probably only an attempt by Telenor to introduce a new partner in Uninor in an indirect manner.

“This, in our opinion, would be breach of the laws of the land,” stated the real-estate firm, which owns 32.75 per cent in Uninor.

Misrepresentation

Reacting to the allegations, a Telenor group spokesperson said it was unfortunate to note the misrepresentations being made with reference to the FIPB process initiated by Uninor. “It is disappointing, though not surprising, to see such attempts at obstruction at a time when both shareholders should in fact be focused on securing Uninor’s immediate funding and long-term future,” Telenor said.

Relations between the two joint-venture partners have soured after Unitech opposed Telenor’s earlier attempt to bring a Rs 8,250-crore rights issue. While the Norwegian company thinks this is vital for funding Uninor’s operations, the Indian partner wants to take bank loans. The standoff has affected Uninor’s operations to the extent that it has now scaled down operations in four circles.

thomas.thomas@thehindu.co.in

(This article was published on July 25, 2012)
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