VSNL land row blocking equity raising plan of Tata Comm

It's been six months since the cabinet approved the demerger of the surplus 740 acre VSNL land into a separate entity. But Tata Communications, as VSNL is now called, says the sale has faced several issues. It's even hampering the company's efforts to retire its USD 1 billion debt, reports Kritika Saxena of CNBC-TV18.

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In June 2012, the cabinet apporved the demerger of the surplus VSNL land into a separate company, an issue that had been stuck since Tata Communications acquired the PSU in 2002. The land is estimated to fetch over Rs 6000 crore to the exchequer. But cut to Decembeer 2012, and still there has been no progress on the sale of the 740 odd acres, the problem seems to be in the demerger process.
Vinod Kumar, CEO, Tata Communications, says that we are going through the process to help move that land into the entity that will receive it. There are some issues that need to be clarified related to capital gains, stamp duties and so on. A committee within DoT has been formed which is looking into that and hopefully we will get a clear solution by all parties.
But the delay is already starting to pinch Tata Communications. Depsite good customer base and a strong footprint across emerging markets the company is still burdened with a USD 1 billion debt pile. According to Tata Communications, it is merely the custodian of the land and will not receive anything from the proceeds of sale. The land issue is delaying its plans to raise fresh equity and bring down its debt.
"As long as the land issue remains unresolved there are ways to raise equity right now but it is much more complex. So the best way is to resolve this and then look at the equity raising option," says Kumar.
The company says it is co-operating with the government to resolve the issue and maintains it will hand the land into the defined SPV once the issues are resolved.