Telecom tower company Viom Networks, a joint venture of the Tata Group and Kolkata-based Srei Group, will consider raising funds through real estate investment trust (REIT) besides the other options of listing and selling stake to a strategic investor to raise growth capital.
The company which is looking into all the three tracks will take a final decision in September this year. Credit Suisse, Citigroup and STJ Advisors are working for Viom’s proposed fund raising.
The company is considering REIT as one of the possible vehicles for fund raising because it can offer assured return to the investors, because it is in the annuity business and has an assured return from rental agreements in towers which are generally for a ten year time frame.
Sources close to the discussions say that the advantage os that a whole host of pension funds prefer this route as this gives them an assured rate of return. Also many of the leading tower companies globally have raised money by floating REIT of their own.
According to regulations, individual investors get assured return which is a share of income produced through commercial real estate ownership while the investors do not need to buy the commercial real estates. The company, which owns and earns rental from commercial real estates like office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, can float REITs to raise funds.
Viom is open to both domestic and foreign investors for raising funds through REIT, among others.
Meanwhile, four companies, including American Tower Company (ATC), Malaysian telecom company Axiata, private equity firms Carlyle Providence, have placed their bids to acquire stakes in the company. The financial advisors had sought bids for the company and 19 August was the last date for bidding.
The bids will be opened in September when the Board meets to take a final decision for raising growth capital. The Board will take the final decision after examining the bids and viability of other possible routes for fund raising. Meanwhile, an independent agency has valued the company between Rs 22,000 crore and Rs 27,000 crore.
Viom had earlier said that it was looking to raise Rs 1,500 crore and may go for an initial public offering (IPO) on foreign bourses. London Stock Exchange (LSE), New York Stock Exchange (NYSE) and the Singapore Stock Exchange are being considered as the possible exchanges for listing.
Tata Teleservices has a 54 per cent stake in Viom Networks, while Srei Group holds 18.5 per cent. The remaining 27.5 per cent is owned by a group of financial investors, including IDFC Private Equity, SBI Macquarie, Oman Investment Fund and GIC of Singapore.
With more than 42,000 towers, Viom Networks claims to be the country’s largest independent telecom tower company. Its tenancy ratio, at 2.3 times, is higher than the industry average. In comparison, the listed Bharti Infratel, which has a little more than 36,000 towers and a market capitalisation of Rs 49,993 crore, has a tenancy ratio of 1.94 times.
Currently, Viom Networks’ long-term debt stands at about Rs 6,500 crore. In fiscal year 2014, the company’s net profit stood at about Rs 100 crore with a revenue at around Rs 5,000 crore.