Tata Sons comes to Telcos rescue

Mumbai: Despite important stakeholders in Telco - like Daimler Chrysler, the state-run and owned Life Insurance Corporation (LIC) and GDR-holders - opting to stay away from the offer, the Telco rights issue has scrapped through, largely due to Tata Sons picking up the unsubscribed part.

Daimler Chrysler holds 10 per cent of the equity, GDR-holders 7.5 per cent and LIC 9.32 per cent in Telco. The Tatas holding in Telco stands increased to over 30 per cent from the existing 25.65 per cent.

The Tatas holding in Telco is through Tisco, Tata Sons and a few trusts. However, other institutional investors like the Unit Trust of India, foreign institutional investors, New India Assurance and United India Assurance have reportedly picked up their portion of the rights. Retail investors and shareholders, too, have reportedly advanced good support to the issue, having picked up their entire portion of the rights.

Last week, there were rampant speculations about the likelihood of the Telco issue failing and falling, as many of its big shareholders had decided against subscribing to their portion of the rights.

Various reasons had been assigned for non-subscription, the most important being that the performance of the company was not up to the mark, with its divisions, Indica as well as commercial vehicles, incurring losses. Cash crunch and financial difficulty were also cited as reasons for some institutional investors deciding against subscribing to the rights.

Telcos simultaneous but unlinked rights issue comprising fully-convertible debentures with detachable warrants and nonconvertible debentures with detachable warrants in the ratio of 1:4 and 1:10 respectively had opened for subscription on 29 of September, before closing on 9 November.

The FCD of the face-value Rs 65 each would get converted into one share of Rs 10 each on 31 March 2002. The NCD on the other hand will carry an interest rate of 11 per cent. The total collection could be in the region of Rs 980 crore, which would be deployed in capital expenditure and product development programmes.