Surplus land demerger can help co raise equity: Tata Comm

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Surplus land demerger can help co raise equity: Tata Comm

While the media reports indicate that the process on demerger of the surplus land is moving forward, Tata Communication is still awaiting decision from government, said senior vice president of corporate strategy, Srinivasa Addepalli.

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While the media reports indicate that the process on demerger of the surplus land is moving forward, Tata Communication is still awaiting decision from government, said senior vice president of corporate strategy, Srinivasa Addepalli.

He feels the land demerger will help simplify capital structure for the company. "The demerger of surplus land can help us raise equity as well," he added.

Talking about the business, Addepalli indicated that the company is still in a comfortable position and the operating profits have also been improving. He also mentioned that the internal cash generation has also improved over the last several quarters.

Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying videos.

Q: What's the latest that you can share with us on the demerger of land front?

A: There is nothing new or specific that the company has to share about the demerger of the surplus land. We are waiting for the decision from the government.

Media reports seem to indicate that the process is moving forward. We believe that's a good news. If it gets done at the earliest, it will be great for the shareholders as well as for the company.

Q: How does it help the company?

A: The surplus land has been a distraction from our regular business operations. It helps the company simplify its capital structure. It has played some constraints on our ability to raise equity funding or any other alternatives on our balance sheet. We believe this will help simplify our funding options as we go forward.

Q: What do you intend to do with the high amount of debt that's sitting on your balance sheet now?

A: The amount of debt is not so high compared to the way the business has been progressing. We are still in a comfortable position. Our operating profits have been improving. Therefore, our internal cash generation has also improved over the last several quarters.

We obviously like to find ways to reduce the intensity of debt, which is happening now through improving our cash accruals and making sure that we fund our future investments mostly through our generation. If the options of equity open up, we'll look at what's the best way forward at that time.

Q: There has been some optimism about the kind of numbers that Neotel has been showing, particularly in the last quarter. What kind of turnaround have you witnessed there?

A: Neotel is a start up in South Africa, building some very critical infrastructure. It has created a wonderful position in the South Africa telecom market, which is large and growing. Therefore, the investments that Neotel has made there are very critical to that market.

The revenue growth has been spectacular over the last few years. In second quarter, Neotel has turned EBITDA positive. It's a natural progress for any start-up telecom business. We are confident that the performance will continue.

Q: Do you expect to see substantial improvement from margins even from what you have reported last quarter?

A: Our business as a whole has been growing. Even our global voice business, which is a very mature and almost zero growth industry globally, will continue to show growth in volumes, revenues and improvement in our margins quarter-on-quarter by improving our productivity and operating efficiencies.

Similarly, our data business has shown substantial growth of nearly 12-13% per annum on an average in a very large market. The revenue growth there is translating into improved margins because we have built a very strong platform of infrastructure as well as product capabilities.

The revenue growth has translated into improved profits. This has been our strategy for the last few years. We have invested in capabilities in infrastructure and the revenue growth has started to translate into profits.