Tata Communications has nothing to gain from VSNL land bank, says Chairman

The Lok Sabha on Wednesday passed the Taxation Laws (Amendment) Bill, which will help unlock the value of erstwhile VSNL’s land of at least ₹6,000 crore. The Bill seeks to exempt the land sale from capital gains tax (CGT). This will benefit the government when it de-merges VSNL’s land bank and monetises it.

What will the Bill bring to Tata Communications’ shareholders?

From a company’s point of view, it is a very significant move in terms of removing a sort of a headache that has been there all along with no clarity. Now, there is absolute clarity, and I must complement the government for this initiative.

A good 30 per cent of the shareholders who have been expecting monetisation of this land as and when it gets de-merged, sold or utilizsd, will find it a boost to their individual shareholding. As far as the company is concerned, we are very happy to take this forward.

Will the Tata Group have any significant stake in the real estate company being de-merged along with the surplus land?

Tatas won’t have any holding in the company. The government will hold 51 per cent. And the remaining 29 per cent retail shareholders, including institutional and individual investors, will have a corresponding equivalent shareholding in that company. Tatas had acquire 26 per cent from the government and 20 per cent in the open offer; that 46 per cent is excluded from the ownership of this de-merged entity.

What benefits will the minority shareholders of Tata Communications get from the de-merged entity?

It would hopefully unlock a value for them. This land has been lying idle. Newspaper reports have estimated it around ₹6,000 crore. But I think it would be even more. And as and when the de-merger is completed and the land is put to use — whether it is for government housing as it envisaged or any other application —it should get converted into a productive asset.

When it becomes a productive asset, the shareholders would get monetisation of their hidden locked-up assets. With this process, they go back to the original state of not having any capital gain liability because this was a commitment made when the company was a public-sector undertaking, though listed at that time also. So, the then retail shareholders had a promise of such monetisation of land without capital gains, which was a law then and even now.

And therefore the shareholders would get to monetise their idle asset without any capital gains tax.

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