Kerry Packer picks up 10% in HFCL

BANGALORE: Australian media player Kerry Packer has picked up 10 per cent

stake in telecom equipment manufacturer Himachal Futuristic Communications

(HFCL), for Rs 1,039 crore. This deal is said to be the largest foreign direct

investment made in the Indian telecom sector. The investment has been made in

the company through Consolidated Press Holdings (CPH), the holding company of

Kerry Packer.

The Australian firm has also formed two other joint ventures (JV) with the

Indian company, one for providing software services and software products, and

the other for offering solutions and infrastructure in the B2B

(business-to-business) e-commerce space. This is a shift in HFCL's business

strategy to new growth areas of software services rather than manufacture of

telecom equipment. HFCL group chairman Mahendra Nahata informed that HFCL would

issue a fresh equity of 71,65,650 shares for the stake priced at Rs 1,450 each.

HFCL with a market capitalization of $3.5billion, recently raised about Rs

735 crore through private placement of its shares at a price of Rs 1,050 per

share. The fresh funds infused in HFCL will help the company achieve its target

turnover of Rs 1,550 crore and profit of Rs 250 crore during the next fiscal.

With fresh inflow of funds, the company will also be able to offer vendor credit

to telecom players, and compete with multinationals in this area. "Turnkey

solution projects need a large working capital, and the fresh funds will help us

in meeting the requirement of working capital. We also plan to make HFCL a

debt-free company in few months. The company, at present, has a long-term debt

of Rs 350 crore," said Mr Nahata.

The two groups also announced two JVs in which HFCL will hold 51 percent and

CPH 30 percent and the rest will be offered to strategic investors. One JV would

take up software product development, software services including animation

work, IT-enabled services like call centres and embedded software that goes into

microchips. The other venture will invest in creating and developing network

infrastructure in India, including the establishment of payment gateways to

support e-commerce, and have content aimed at specific business areas. "The

joint venture expects to capitalize on the growing B2B e-commerce market in

India, taking advantage of the combined strengths of the two companies,"

said CPH joint CEO James Packer.

"We have not yet finalized the business plans of the JVs for software

and e-commerce. As per the initial estimates, we will invest to the tune of Rs

100 crore in each of the JVs," said Mr Nahata. HFCL has also proposed to

take controlling stake in Essar Commvision, a licensee for fixed-line telecom

services in Punjab. It plans to set up and operate a broadband telecom network

providing voice and multimedia services. The company expects a turnover of Rs

590 crore and profit of Rs 80 crore during this financial year.