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TCIL: Looks to divest stake to fund its capex needs

Company Stories , October 28, 2013

After several failed attempts in the past, Telecommunications Consultants India Limited (TCIL) may finally be able to raise money to fund its capex needs. The state-run telecom consultancy company recently received the Telecom Commission’s approval to exit Bharti Hexacom, its joint venture (JV) with Bharti Airtel. TCIL holds a 30 per cent stake in the JV and has been intending to sell the same for many years to fund its business expansion plans.

However, the stake’s valuation has always been a key point of disagreement. In its first attempt at a stake sale in 1995, TCIL could get an offer of only Rs 2.51 billion against the base price of Rs 5.21 billion. In 2011, Deloitte quoted Rs 18 billion as the base price, which was deemed “too low” by the Telecom Commission. Thereafter, the plan was put on the back burner citing unfavourable market conditions.

Following the Telecom Commission’s approval, TCIL is in the process of appointing an independent adviser to recommend a reserve price for its stake. As per industry estimates, TCIL’s net worth in Bharti Hexacom stands at about Rs 14 billion and the stake sale, if successful, will help the former in meeting its growing funds requirement.

tele.net looks at TCIL’s key projects, current performance, growth areas and the way forward...

  Key projects and focus areas

TCIL, since its inception in 1978, has undertaken several noteworthy telecom and IT projects in India and overseas. These include the development of state-wide area networks in several states; establishment of kisan call centres for providing information on agriculture-related issues to Indian farmers; the Pan-African e-Network Project for providing tele-education and telemedicine services between India and 53 African countries; and an e-network project for SAARC countries. TCIL has also prepared the consultancy blueprint for the National Optical Fibre Network project, which aims to provide high-speed internet connectivity to 250,000 gram panchayats in the country. Besides, the company’s expertise and competency lies in core and access network projects, IT and networking solutions, switching and transmission systems, telecom software, and cellular services. In the telecom consultancy space, TCIL is providing services for the Asian Development Bank-funded South Asia Subregional Economic Cooperation Program in Nepal and Bhutan.

Over the years, the company has forayed into several new business and technology segments to keep pace with the evolving telecom ecosystem. Fibre-to-the-home (FTTH) has become a key focus area for the company both in India and overseas. The uptake of data services is growing at an exponential rate and operators are deploying more fibre-based systems to cater to the surging bandwidth requirements. In August 2013, TCIL secured the basic design, engineering and third-party monitoring contract for Reliance Jio’s FTTH network in Ghaziabad. The company is also implementing FTTH projects in West Asia, Africa and the Gulf region comprising Saudi Arabia, Kuwait and the UAE. TCIL manufactures optical fibre cable through its group company Tamil Nadu Telecom Limited in collaboration with Fujikura Japan.

The company has also diversified into architectural consultancy and civil construction, and has undertaken the construction of roads through tendering projects of the National Highways Authority of India as well as state highway departments. TCIL derives close to 40 per cent of its revenues from this segment.

Recognising the importance of renewable energy as a potential source for powering telecom towers, TCIL has also begun providing turnkey green solutions to telecom operators. Currently, it is deploying these solutions for operators in Saudi Arabia and Oman.

 Financial performance

TCIL is among the few profit-making PSUs in the Indian telecom sector. The company earned a profit of Rs 80.3 million in 2011-12 on a turnover of Rs 6,807.9 million. During the first six months of 2012-13, the company earned Rs 16.8 million in profits and reported a turnover of Rs 2,784.7 million, even as several telecom companies continued to register losses.

The company has been faring well on the operational front as well. Between April and December 2012, TCIL secured orders worth Rs 2,870 million. The biggest amongst these was a Rs 380 million advance purchase order from Bharat Sanchar Nigam Limited for the supply and installation of digital satellite phone terminals.

 The way forward

While TCIL has managed to build a strong project pipeline over the years, these projects have increased the company’s capex significantly. TCIL’s funds requirement is expected to reach over Rs 10 billion in the next two years, which creates an urgent need for raising financing. A deal with Bharti Hexacom could provide it a much-needed shot in the arm.

 
 

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