Tata Communications to raise Rs3,000 crore for acquisitions, expansion

Tata Communications is planning to raise around Rs3,000 crore via issue of rights equity and debt to finance overseas acquisitions and bidding  for wireless broadband spectrum. 

Tata Communications has approached the government, which has a 26 per cent stake in the erstwhile public sector firm, with proposals for Rs1,000 crore rights issue and for raising another Rs2,000 crore through debt.

The company will use the proceeds to finance acquisitions in the US and the UK and bid for wireless broadband spectrum. It is also planning to deploy part of the funds for its new submarine cable projects and possible acquisitions in the managed services space, company sources said.

Company sources declined to give details of the target companies and merely said it is evaluating a few targets in the US and the UK considering the low current valuations.

The company is seeking permission from its major shareholders - Tata Sons and the government of India - for infusion of Rs1,000 crore equity through rights issue. It has also approached some financial institutions and banks for raising funds.

Tata Communications has been trying to raise equity since April 2008 but the government so far has not cleared the proposal. It is yet not known whether the government will now subscribe to additional equity in Tata Communications.

Alternatively, a rights issue without the government taking part in it would dilute its stake from the existing 26 per cent.

The company said it is weighing all options for raising funds to support its investment plans and no decision has been made so far.

The fund-raising plans are aimed at creating a war chest that would give financial flexibility for the company for tapping new opportunities, sources said.

Last year, Tata Communications acquired Tyco Global Network for $130 million and Teleglobe for $239 million. Recently, the company acquired an additional 30 per cent stake in South African operator Neotel and entered into a joint venture with a Chinese operator.

The company also had plans to invest $2 billion in its submarine cable networks, Wimax and data centers. The company may also need funds to the tune of Rs2,000 crore for the upcoming auction for Wimax spectrum.