A group of private equity (PE) and hedge funds representing minority shareholders of Reliance Infratel Ltd, the telecom tower arm of Anil Ambani’s Reliance Communications Ltd (RCom), have demanded that RCom buy their stakes back before going ahead with its majority stake sale to Brookfield Infrastructure Group, two people aware of the development said on condition of anonymity.
“The PE funds have invoked a shareholder agreement under which RCom is obliged to buy their stakes back and also seek their approval before a majority stake sale in Reliance Infratel,” said the first person, a senior partner in a private equity fund which is one of the minority shareholders of Reliance Infratel.
On 21 December, RCom signed a binding agreement with Brookfield to sell a 51% stake in Reliance Infratel for Rs11,000 crore. RCom currently owns close to a 96% stake in the company, while the remaining ownership is with minority investors.
“The minority shareholders are still in talks with RCom to resolve the matter amicably but have also engaged a Mumbai-based law firm to explore legal options,” said the second person cited above.
PE and hedge fund investors NSR Partners, HSBC Daisy Investment (Mauritius), George Soros’ Quantum Funds, Galleon, HSBC Daisy Investment (Mauritius), Drawbridge Towers, Investment Partners B (Mauritius) had invested $287 million in Reliance Infratel in July 2007 but there have been reports of conflict between the two sides.
While NSR declined to comment, emails sent to RCom and other minority investors remained unanswered till the time of going to press. An HSBC India spokesperson responded saying, “We do not comment on market speculation.”
The Economic Times reported in March last year that the PE Funds had opposed an earlier move by RCom to merge Reliance Infratel with another group company, citing concerns around the valuation of the company. The PE funds are understood to have valued the company at close to Rs32,000 crore whereas RCom’s deal with Brookfield values the company at close to Rs22,000 crore.
RCom is one of the most indebted mobile phone service providers in India with debt of about Rs42,000 crore. RCom is also merging its wireless business with smaller rival Aircel and has said that the deal with Brookfield will help reduce its debt burden as it will transfer a part of its loans to the new venture.
Under the terms of the agreement, the telecom tower assets will be transferred from Reliance Infratel to a separate special purpose vehicle to be owned by Brookfield. RCom will continue as an anchor tenant in the tower assets. Reliance Infratel has a portfolio of 45,443 towers and is present in all 23 telecom circles of the country.