Tata Communications Ltd (TCL) is the erstwhile VSNL.
The company has 3 main businesses:
Voice : 50% of revenues
Data : 39% of revenues
Neotel : 11% of revenues
Neotel is South Africa’s 2 nd largest Telecom company.and TCL
own about 67.32% stake in Neotel.
Lets briefly look at each of the 3 businesses:
1)
Voice:
·
TCL is the World's largest carrier
of International wholesale traffic.
·
During 2012-13, the company
carried 5340 cr minutes of international
voice traffic globally.
·
TCL has relationships with 1600
leading international voice telecom providers
·
This business is largely a
commoditized and a mature one. Company's strategy is to furher consolidate its leaership
and take advantage of increasing traffic volumes while protecting margins
·
In the National ( Indian ) long
distance voice business, the company haa approx 55% market share
2)
Data:
·
Carries 20% of the world’s’s
internet traffic directly over its
network
·
Has 15 terabits of International bandwidth
lit capacity
·
Its network consists of 2,10,000 km
of terrestrial and subsea network fibre and reaches countries representing
99.7% of the world’s GDP
·
Own’s 1 Mlllion sq feet of data
centre and co-location space across 42 global locations
3)
Neotel:
·
South Africa’s first converged
communications network operator, offering services that bring together voice,
data & internet, delivered via optical fibre or wireless access. Services
delivered via Neotel’s own independent network
·
Turned profitable at operating level
in June 2013 quarter
Financials:
Equity : 285 cr
Consolidated Debt: approx Rs.11,000 cr
CMP: Rs.191-193
Where’s the Honey ?:
When the Govt of India divested its majority shareholding in VSNL, it was
agreed upon that the Surplus land ( specifically identified at that time) would be hived off into a separate company.
Accordingly after an agonizing gap of nearly 10/11 years, as per the scheme of demerger ( for the
surplus land) , a new company called Hemishpere Properties India Ltd has been
formed.Presently, the boards of TCL & Hemisphere are awaiting the scheme of
demerger to be placed before them.
Expected shareholding of Hemisphere is as follows:
Govt of India : approx 51%
Minority Shareholders who tendered their shares in the oen
offer of VSNL: approx 20%
Current minority shareholders: approx 29%
The surplus land is as follows:
Dighi—Pune 524.00 acres
Halishahar,Kolkata -35.19 acres
Chattarpur ,Delhi-58.00 acres
Greater Kailash.,Delhi-70.00 acres
Padianallur,Chennai-85.94 acres
Total 773.13 aacres
The land has been valued at between 15,000 cr & 25,000
cr.
Is this valuation correct ?
What will be the stamp duty & capital
gain tax on the transaction ?
In the present scenario, are there buyers who can
cough up this kind of monies ?
What will be the time frame ?
Above are all relevenat
questions to which I have no meaningful answers.
That the demerger
will happen eventually is a given.
Anther point of
interest is that besides the so–called Surplus land, there are various other
invaluable real estate assets sitting with Tata Communications.
e.g VSNL Tower
in mumbai's fort area , the prabhadevi administrative headquarter in
mumbai , vsnl bhavan at kolkata, Telecom
Centre Building at bandra-kurla complex in Mumbai and many many
others which include the erstwhile VSNL staff quarters in different cities in prime locations. It is evident that from
these assets the company will keep on monetizing the non core ones.
e.g. in the
previous financial year,the company has completed a sale transaction of the
land parcel and building situated at Nungambakkam, Chennai, for a transaction
value of Rs 192.3 crore. This land parcel and building was earlier being used
as a staff housing colony.
In its core business, the company has been steadily leveraging each layer of capability and mving up to the next. One example of this is, the company's foray into White -label ATM's which is a natural and logical extension of its Data capabilities and infrastructure. The company currently operates around 16,000 ATM's and is looking at adding another 12,000-13,000 over the next year and a half.
Notwithstanding this, considering the
commoditized nature of its core business and the numerous other possibilities laced
with question marks which I have tried to highlight above, it is difficult to
arrive at a meaningful valuation for the company.
On one aspect
though, there should not be any ambiguity, that the current market price of
about Rs.192 / 193 does not do justice. But can’t that be said about numerous
other companies in today’s scenario ?
What is different here though is that
here it does seem that the bride is all ready and raring to go, the groom too
is in place. All that remains is parental consent and providential blessings.
At the time of writing this report, the author /his
family have an investment interest in the stock mentioned above. Under no
circumstance does the information in this report represent a recommendation to
buy or sell the above-mentioned stock. This report has been prepared and
issued on the basis of publicly available information, internally developed
data & other sources believed to be reliable. This is just a suggestion
solely for information purposes and does not constitute a solicitation to any
person to buy or sell a security. While the information contained therein has
been obtained from sources believed to be reliable, no responsibility (or
liability) is accepted for the accuracy of its contents. Readers using the
information contained herein are solely responsible for their actions and are
advised to satisfy themselves before making any investments.
