Tata Comm to raise additional debt

New Delhi: The Department of Telecom (DoT)has asked Tata Communications (formerly VSNL) to give details of the projects for which it wants to raise additional debt.

Tata Communications, in which the Government holds 26 per cent stake, had approached DoT seeking a waiver in the shareholders’ agreement to raise loan to fund its expansions plans. However, the agreement between the Government and the Tatas stipulates that the company cannot raise debt in excess of its net worth.

While Tata Communications had told the Government that it required additional funds to carry out new projects, it had not clearly specified the details of its plans. It had simply said that expansion plans will get affected as it is facing a crash crunch. DoT has now asked the company to clearly spell out the details of the project for the Government to take a decision on giving a waiver.
Clarifying its position, Tata Communication’s spokesperson said, “The company has sought to raise additional funds to support some of its growth and investment projects and is working with key stakeholders towards the same. Tata Communications has approached its promoters, including the Government of India, for enhancement of borrowing limits to the levels permitted under the Companies Act.”

According to the provisions of Companies Act, 1956, a company can borrow as long as it does not exceed the aggregate of the paid-up-capital and its free reserves.

Legal opinion
However, DoT officials said that its legal advisors have opined that the provisions of the shareholders agreement is in addition to the Companies Act and is not in derogation.

They said that the company can take loans up to Rs 1,400 crore, but for any additional debt, the shareholders agreement will have to be amended.
For the nine-month period ended December 2008, Tata Communications reported a 13.71 per cent dip in net profit at Rs 211.92 crore.

The firm had a net profit of Rs 245.60 crore in the same period in FY 2008.

The revenues rose 16.62 per cent to Rs 2,837.35 crore in the nine month period, from Rs 2,433.06 crore in the same period last fiscal.