Tata Communications Ltd (TCL) has informed the department of telecommunications (DoT) that there is “serious shortfall of working capital in the company to meet its annual operating plan.” It has sought permission to sell TCL’s stake in Tata Teleservices to NTT-DoCoMo so that it could get Rs 430 crore to meet working capital.
Government owns 26% equity in TCL formerly known as VSNL. Therefore, the company needs DoT’s permission to raise funds.
TCL has informed DoT that its funding position has reached a critical stage in January, said a DoT official.
The company has informed DoT that January to March is going to be a serious challenge in view of liquidity crunch. The next financial year (F10) is going to be “near impossible” without additional non-debt funding.
It has said that the credit availability in the international market is very scarce limiting TCL’s ability to raise funds. These conditions are expected to rule the market for at least one year.
“The board has taken a decision to go-ahead with the sale of a part of its holding in Tata Teleservices at the rate offered by NTT-DoCoMo. This transaction is expected to yield about Rs 430 crore to the company, which is badly needed to meet its serious shortfall of funds to pursue its annual operating plan,” according to a DoT note.
The company needs at least $400 million to participate in the bidding process for auction of WiMAX spectrum. Auction for WiMAX spectrum is expected to be held in January along with 3G spectrum. TCL has also sought permission from the government to allow relaxation of the provision of share holders agreement (SHA) that puts a cap on the total indebtness of the company vis-a-vis its networth.