Capital Restructuring in

Tata Teleservices

Nikunj Barnwal
Agenda
• About Capital Restructuring
• Overview of TTSL
• Capital Restructuring at TTSL
• Usage of the fund
• Source of the fund
• What happened earlier…
• Claims
Aspects of Capital Restructuring

• Leverage of the company

• Investment pattern

• FDI participation

• Divestitures
Benefits

• Better financial muscles

• Access to greater/better technology

• Focus on core competencies

Motives
• To enhance liquidity
• To lower the cost of capital
• To reduce risk
• To avoid loss of control
• To improve shareholder value
Overview
• a part of the Tata Group of companies, an
Indian conglomerate
• The company forms part of the Tata
Group's presence in the
Telecommunication Industry in India, along
with Tata Teleservices (Maharashtra)
Limited (TTML) and TATA
COMMUNICATIONS LTD.
Overview Contd…

• Tata Teleservices is part of the INR Rs.

2,51,543 Crore (US$ 62.5 billion) Tata
Group, which has a committed investment
of INR 36,000 Crore (USD $7.5 billion) in
Telecom (FY 2006), the Group has a
formidable presence across the telecom
value chain.
Capital Restructuring
• TTSL had written off Rs 5,141.28 crore,
and will write off Rs 1,648 crore more as it
goes ahead with the third leg of its capital
restructuring programme which comes in
the wake of a November announcement
by NTT DoCoMo Inc. that it was paying
$2.7 billion (Rs13,070 crore) for a 26%
stake in the company
Usage of the fund
• It will use gains of Rs1,648.74 crore from
revaluing its equity investment in listed
subsidiary Tata Teleservices
(Maharashtra) Ltd, or TTML, to write off
more book losses and unabsorbed
depreciation
• The company has till 15 March 2009 to
complete this restructuring.
• All such schemes have to be approved by
high courts, according to India’s
Companies Act
Source of the fund
• TTSL has explained that its investment in
714.3 million TTML shares, which was
valued at Rs 387.05 crore or about Rs 18
per share, was in September revalued at
Rs 28.5 per share, based on six-month
average market prices on the National
Stock Exchange (NSE).
• Following the revaluation, this investment
has grown to Rs 2,035.80 crore, an
appreciation of 426%.
What happened earlier…
• TTSL’s earlier plan had envisaged halving
its equity capital to Rs 3,173.57 crore and
using Rs 1,967.71 crore from its share
premium account to write off past losses
and unabsorbed depreciation.
• TTSL’s losses increased from Rs 8,547.49
crore as on 30 September 2007 to Rs
9,177.17 crore as on 31 March.
Claims…
• TTSL reiterated in its petition that “no one
will be prejudiced if the proposed scheme
of arrangement and restructuring is
sanctioned and the sanction of the scheme
will benefit the company and its
shareholders and will have no adverse
impact on the creditors of the company.”
• TTSL has also maintained that the
“reduction in capital does not involve any
financial outlay/outgo” and is “only in the
nature of a book entry.”
Web References:-
• http://www.universalteacherpublications.com/

• http://www.businessdictionary.com/definition/

• http://www.livemint.com/2008/12/15234627/T
Have a nice evening…
-Nikunj