Tata Communications has suggested to the Government the outright sale of erstwhile VSNL land assets and distribution of sale proceeds to the shareholders as a special dividend in the formula envisaged in 2002 share purchase agreement between the Government and Tata group.

According to a top company official, this will avoid various procedural hurdles in hiving away the assets into a holding company by way of de-merger, but protect the interests of all stake-holders, principally the Government and the minority shareholders, including ADR holders.

Tata Communications has been holding 773 acres of VSNL land for the past nine years as a trustee.

The share purchase agreement had specifically stipulated that the land assets were to be de-merged. If the Government accepts Tata Communications suggestion, it would mark a shift in letters, not in spirit, the company sources told Business Line .

According to the agreement, the Government and all public shareholders (LIC 8.74 per cent), including those who had sold off their shares in the open offer, will be entitled to the shares of the demerged asset holding company.

“This principle can be followed in case of direct land sale and distribution of proceeds. Now the company's ADRs, listed on NYSE, are a stumbling block as the exchange does not encourage listing of non-revenue earning companies,” the source said.

Currently, members of the Government panel are visiting all land sites in Chennai, Kolkata, New Delhi and Pune before submitting the report on an extended deadline of April 21.

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