A couple of days after its stocks suffered a massive hammering on the bourses, Unitech, the country’s second largest real estate player, on Wednesday got some reprieve, managing to cut a deal for its telecom arm, Unitech Wireless. The company is offloading up to 60% stake to Norwegian telecom player Telenor for $1.2 billion.
The deal values Unitech Wireless at Rs 11,620 crore or about $2.32 billion. However, given the sale amount of Rs 6,120 crore for a 60% stake, the company would actually be valued at only Rs 10,200 crore. Sanjay Chandra, managing director, Unitech, declined to comment on the debt structure of the company, which has a debt component of around Rs 1,970 crore.
Telenor is the world’s seventh largest mobile operator and has operations in Europe and Asian countries, including a100 % subsidiary in Pakistan. It is also the fourth largest telecom operator in Asia. The company has a subscriber base of 159 million and revenue of $15 billion.
Unitech has constantly seen its scrips take a beating on the stock exchange through the year, shedding over 86% of its market value. On Wednesday, the company’s shares closed at Rs 49.9 on the Bombay Stock Exchange, gaining 1.63% over the previous day’s close.
Though Chandra said this was the right valuation for the company, a comparison with another new telecom licencee, Swan Telecom, which recently offloaded 45% stake to Arabic telecom giant Etisalaat for $900 million, shows Unitech is undervalued.
Swan Telecom currently has licence for only 13 telecom circles and it earned an enterprise valuation of $2 billion, while Unitech, with telecom licences for 22 circles, earned a valuation of $2.32 billion. The company was earlier hoping for a valuation of around $4 billion but given the current global financial crisis, the benchmark set by Swan Telecom for valuation of startup telcos and the difficult real estate market, Unitech has sold 60% for $1.2 billion. The company was earlier planning to divest around 26% to a foreign partner.
The 60% stake would be offloaded in stages. The regulations allow up to 49% sale via the automatic route;. beyond that, till the cap of 74%, it has to be through FIPB.