Sterlite Tech to spin off power biz into unlisted firm

Alka Kshirsagar Pune | Updated on January 23, 2018 Published on May 18, 2015


Listed entity to retain telecom operations

Sterlite Technologies Ltd will spin off its power business into a separate unlisted company while retaining its telecom operations in the existing listed entity.

The de-merger will be effective April 1, 2015 subject to all necessary approvals.

Following the restructuring, approved by the Board at its meeting on Monday, Sterlite will become a pure-play telecom products and solutions company, providing broadband solutions for fully converged networks.

The power products and the power transmission grid businesses will be de-merged into Sterlite Power Transmission Ltd (SPTL), an independent, unlisted entity.

“Telecom is a high growth, high margins business while power is an asset-heavy business and brings a high load of debt on the balance sheet,” Anand Agarwal, CEO, Sterlite Tech, told BusinessLine.

Hence, logically the two should not reside in the same company, he said.

To put things in perspective, though each of power and telecom businesses contributed almost equally to Sterlite’s revenue of ₹3,300 crore in FY-15, ₹345 crore of the total EBITDA of ₹386 crore came from the telecom business.

According to the terms of the restructuring, the equity shares of the telecom business will continue to be publicly listed, while those of the newly formed power business will remain unlisted.

Investors will have the choice to continue to be associated with one or both these businesses.

Once the mirror de-merger scheme is effective, investors will retain their equity share (face value ₹2) in the telecom company. Additionally, for every five equity shares held in Sterlite, shareholders will have an option to receive one equity share of ₹2 each of SPTL issued at a premium of ₹110.30, or one redeemable preference share (RPS) of ₹2 each issued at a premium of ₹110.30 each, implying a value of ₹22.46 per equity share of Sterlite.

They then will have the option of continuing to be invested in SPTL or redeeming the RPS during two designated windows of time – within 30 days of the issue or after an 18-month period.

The value of SPTL has been decided by the Board based on the recommendation of Price Waterhouse & Co LLP and Haribhakti& Co LLP. The value of the demerged undertaking after taking into consideration the allocation of debt would be ₹885 crore.

Post de-merger, Sterlite Tech will retain a consolidated net debt of ₹674 crore against a pre-restructuring consolidated net debt of ₹4,881 crore, which includes project-level debt of around ₹3,400 crore for six special purpose vehicles executing power projects, Agarwal said.

The appointed date for the de-merger is April 1, 2015, and it is expected to be completed by the fourth quarter of FY16.

The proposed restructuring is subject to approval by the High Court, SEBI, shareholders of Sterlite Tech, its creditors and other relevant regulatory authorities.

During intra-day trade on the BSE, the Sterlite share hit a high of ₹69.30 before closing at ₹66, a rise of 4.27 per cent.

Published on May 18, 2015
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