The Hindu Business Line : VSNL allowed to invest Rs 835 cr in Tata Tele

THE committee set up to look into the modalities of VSNL's controversial investment in Tata Teleservices has decided that VSNL will invest Rs 835.8 crore in TTSL, at par and over a 7-year period, for a 19.9 per cent stake.

The much-awaited report of the committee was placed before the board of directors today.

Since the terms of reference of the committee were to decide (and not merely to recommend) the quantum and modalities of the investment, the decision was as good as accepted by the board, said a VSNL director.

An amount of Rs 636.8 crore will be disbursed over the first four years, with the remaining amount to be disbursed as per a time-table and mode to be decided mutually between TTSL and VSNL, said a news release.

The earlier decision was for an investment of up to Rs 1,200 crore, to be made over four years for a 20- 26 per cent stake in VSNL; this had raised a storm of protest from the Ministry of Telecommunications, which said this constituted "asset-stripping.'' Following this, a committee extracted from the company's board was set up to look into the matter.

The committee had appointed ICICI Securities to do an independent valuation of TTSL. Based on this, as well as other valuations done by TTSL, it had been decided that the investment would be at par, said a news release.

VSNL, however, insists this is not a "scaling down" of its intended investment in TTSL. The requirement for equity had changed following TTSL's plans to acquire Hughes Tele.com, claimed a spokesperson.

Whereas the earlier equity requirement was Rs 4,250 crore (for a project cost of Rs 8,250 crore), the current equity requirement for TTSL amounted to Rs 4,180 crore (for a project cost of Rs 7,530 crore), he said.

The equity cap had been set at 19.9 per cent so as to avoid accounting complications, said VSNL in its official news release. This is so as not to have to consolidate the accounts of TTSL into its own books.

On whether VSNL had other plans for the notional savings of around Rs 400 crore, a VSNL source said the notion of "savings'' is purely in the realm of speculation. "This committee's decision basically clears up the misunderstanding on the issue. Earlier too, we had decided on an investment of "up to Rs 1,200 crore''; the actual investment could have amounted to any quantum below this cap.''

Mahajan feels vindicated: The Union Communications Minister, Mr Pramod Mahajan, told Business Line: "I am happy about the decision taken today. You may recall that VSNL had in May proposed to invest Rs 1,200 crore in TTSL, but now they have brought down the figure to nearly half the earlier amount. While I would not call it a victory for me, I would consider that my intervention was in the best interests of the shareholders. The Government will continue to support VSNL and I hope the company does well under the Tata group."

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