Expansion plans on track, says Tata Comm

Scotching rumours that the company is facing a cash crunch, Tata Communications has said it will step up action on all its ongoing projects, international as well as domestic. Corporate strategy head V P Srinivasa Addepalli said on Saturday that cash would not be a constraint for the company.

Over the past few months, the company has been consistently raising debt to finance its projects. In an interaction with the media, the company's management admitted that the interest burden would be a concern, but at the same time confirmed that the expansion plans would be on schedule. The company had last year announced that it would invest $2 billion as capital expenditure over a three year period.

Tata Communications' newly-appointed CFO Sanjay Baweja said the company's debt-to-equity ratio was less than one. "The interest cost will be a huge outgo but we will be able to handle it," he said. "For a company like ours, raising capital shouldn't be very difficult even in these market conditions."

Tata Communications recently increased its stake in Neotel of South Africa to 56 per cent from 26 per cent. "We will look for similar opportunities to grow in South Asia, Middle East and other parts of Africa," said Addepalli. Tata Communications has also entered into a joint venture in China to provide network security and other telecom-related solutions with China Entercom (CEC).

The company plans to spend $400-$500 million in the current fiscal. "Connectivity requirement is on the rise, and we will invest in building data cables to connect India with Europe and South Africa," Addepalli said. In mid-February, the company launched its internet data centre in Singapore, connecting Singapore to Japan via the Philippines, Hong Kong and Vietnam.

Stake sale on cards: On Friday, Tata Communications said it was exploring 'alternative options', including the sale of its stake in Tata Teleservices Ltd, to keep its capital expenditure plans on track. Tata Comm has a 15 per cent stake in TTSL.

The company, which has raised debt of around Rs1,750 crore over the last five months, can use the route to raise only Rs1,400 crore more. The government owns 26 per cent in Tata Comm, and under the Companies Act, it would need government permission to take on debt more than its net worth as this would dilute the government's holding.

Earlier this month the government had reportedly questioned the company's need to raise its borrowing limit. In the last fiscal, it has already raised debt of around Rs 5,100 crore, close to its net worth of Rs 6,547 crore.

But without fresh infusion of funds, Tata Comm would find it difficult to continue its ambitious capital expenditure plans, which include two new submarine cable systems and a wireless broadband network.

Addepalli admitted that the company needs "alternatives", such as a Tata Telecom stake sale, to keep its growth going. "For the kind of investments we have announced, we need funds and we are raising them," he said. "We are working on alternative options like participating in the secondary sale of shares in Tata Teleservices," Addepalli said.

However, Tata Telecom is unlikely to go for a stake sale in its retail broadband unit, Tata Communications Internet Services Ltd (TCISL), only after the much-delayed auction of WiMax spectrum takes place.

"We are open to the idea of selling a minority stake to strategic investors. However, we will wait till the WiMax spectrum auctions happen for clarity to emerge on the valuations front," Addepalli said.

Analysts say the company, which holds spectrum for WiMax services, would be able to command a very high valuation, even as valuations across the globe have toppled. In India, the 3G and WiMax auctions were expected to happen in January this year. However, both auctions have been repeatedly postponed.