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Follow UsJanaki Krishnan and Shailendra Bhatnagar
MUMBAI/NEW DELHI: India's second-ranked mobile services firm, Reliance Communications Ventures Ltd., approved a "sponsored" secondary sale of stock overseas for up to $1 billion to attract foreign investors.
A sponsored offering of American or global depositary receipts will allow existing shareholders to offer their shares to overseas financial and strategic investors at a premium to the domestic market price. There will be no dilution of equity.
Sources in Reliance Communications said the company was planning to list on the London Stock Exchange but a time frame was not clear.
The news lifted shares in Reliance Communications as much as 4.6 percent to an all-time high of 347.7 rupees in a firm Mumbai market.
Reliance Communications, which is controlled by Anil Ambani following a split of the Reliance conglomerate between two feuding brothers last year, said the offer would also be aimed at retail and institutional investors in Japan.
Elder brother Mukesh controls India's top petrochemical giant and oil refiner Reliance Industries Ltd.
"More high quality investors will enter the stock," said Jigar Shah, head of equities at K R Choksey Shares & Securities.
"This will lead to an improvement in perception and possibly valuation as well."
Mumbai-based Shah retained his "buy" rating on the company, saying he had a one-year price target of 450 rupees.
Shares in Reliance Communications, which made their stock market debut in March, closed 2.3 percent higher at 340 rupees while the main BSE index inched 0.1 percent up. The stock will become a part of the BSE index from June 2.
Reliance Communications, which competes mainly with carriers such as Bharti Airtel Ltd. and state-run Bharat Sanchar Nigam Ltd., has a market value of $9 billion, making it the second-most valuable telecoms stock after New Delhi-based Bharti.
FOREIGN INTEREST
"It is an opportunity for the company to encash the heightened foreign interest in Indian equities," said Arun Kejriwal, strategist at research firm KRIS.
Mobile ownership is soaring in Asia's third-largest economy as local call rates of as low as 2-3 U.S. cents a minute lure customers in the world's fastest growing wireless market.
Indian carriers added more than 5 million new wireless customers in March, but mobile usage remains limited to below 10 percent of the total population as networks are largely city-centric.
Billion-plus India's mobile user base exceeds 90.5 million, more than the population of Germany.
Bharti already has two major foreign carriers as its shareholders. Singapore Telecommunications owns a 30.84 percent stake and Vodafone Group Plc has nearly a 10 percent holding in the Indian firm.
Foreign funds have invested more than $4.2 billion in Indian shares since the start of January on hopes of strong economic growth, lifting the main BSE index 32 percent.
Reliance Communications, India's top-ranked CDMA-based mobile services provider, also runs a small operation on the rival GSM platform. Its total mobile user base surged 62 percent to 17.3 million customers at the end of March.
Wireless services accounted for 56 percent of March quarter revenue of 29.7 billion rupees.
Total customers -- including fixed-line users -- grew 74 percent to 20.44 million. In comparison, Bharti's mobile user base stood at 19.6 million and total customers at 20.9 million.
Apart from mobile services, Reliance Communications also offers national and international long distance services and high speed Internet connections. Its network is spread across all 23 circles or zones that make up the domestic telecoms market.