Companies

How a ₹40,000 crore IPO could have spared BSNL its current troubles

PALAK SHAH Mumbai | Updated on December 20, 2019 Published on December 20, 2019

The death warrant of Bharat Sanchar Nigam Ltd (BSNL) was signed nearly a decade ago when the government of the day, the Congress-led UPA, did not push for the company’s proposed Rs 40,000 crore initial public offer (IPO). Had the IPO happened, the company would have been saved of the predicament that it has to go through currently, experts in India’s stock market told BusinessLine.

BSNL, which was India’s largest telecom operator in 2008, purely failed as it could not upgrade its technology to retain customers, and lost to the competition from private companies Bharti Airtel and Vodafone. The money that it could have raised from the IPO would have helped it retain the top position, as it would have been able to compete, experts say.

In 2006-07, BSNL’s total income stood at around Rs 40,000 crore, with profits after tax of Rs 8,000 crore. At the end of 2007, BSNL’s value was nearly pegged at Rs 4,00,000 crore. Comparatively, Bharti Airtel’s market capitalisation then was Rs 1,70,000 crore and that of Reliance Communications Rs 1,60,000 crore.

While private sector companies keep raising money via various instruments, BSNL was choked for funds. From 2007-08 onwards, the PSU’s profits first started falling, and two years later, it turned into losses.

In the financial year ended March 2012, BSNL’s post-tax losses almost touched Rs 9,000 crore, with its income also falling below Rs 28,000 crore, a 30 per cent decline over that in 2006-07.

In January 2008, the then BSNL chairman Kuldeep Goyal told a business newspaper, “An IPO may be necessary in the medium term to finance our massive expansion plans. After all, BSNL has already lined up a capex of around Rs 60,000 crore till 2010, of which Rs 18,000 crore will be invested in 2008-09. Its reserves stand at Rs 30,000 crore till date. Incidentally, it is not expecting a quantum jump in revenue due to fall in number of fixed lines and falling tariff.”

BSNL IPO plans put off

In September 2010, the Telecom Department (DoT) told a parliamentary committee, which scrutinises the accounts of the government and state-owned companies, that BSNL’s listing will be taken up only after the company’s performance improves in order to get the right valuation. This killed all the hope for India’s largest telecom operator, brokers say.

The fact that the government should sell 30 per cent stake in BSNL through an IPO and also raise funds from the sale of its infrastructure, such as signal towers and real estate, was suggested by a panel, whose members included banker Deepak Parekh.

In July 2010, the Telecom Commission, the highest decision-making body of the DoT, that had met to clear the IPO, but shied away from taking any decision.

Also read: At final call, around 92,700 BSNL, MTNL staffers opt for VRS

Just last month, the government has now approved a Rs 69,000 crore revival package for BSNL and MTNL — this includes merging the two loss-making firms, monetising their assets and giving VRS to employees — so that the combined entity turns profitable in two years. The package includes infusion of Rs 20,140 crore for purchase of 4G spectrum and Rs 3,674 crore for GST to be paid on spectrum allocation.

Published on December 20, 2019

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