GTL board okays 1:1 swap for demerger into GTL Infrastructure (GIL)

22nd November 2005: Mumbai-based network engineering services company GTL’s board has approved a swap ratio of 1:1 for the demerger of all its telecom and network-related infrastructure business to GTL Infrastructure (GIL).

Existing GTL shareholders will get one share in the demerged GIL. Swiss fund Telecom Infrastructure Fund will pick up 26% in GIL for Rs 10 per share. GTL shareholders will hold 33% through the swap ratio of 1:1 and GTL will hold 41%.

The equity capital of GIL is Rs 27 crore (100% subscribed by GTL). GTL will made a further investment of Rs 106 crore in the equity at Rs 10 share. GIL shares are expected to be listed on the stock exchanges soon.

GTL has been undergoing a massive restructuring over the past couple of months. The objective is to focus on the core competencies. The company is also planning to utilise some of its cash to reduce its debt and bank loans.

Infrastructure assets of Rs 214 crore comprising data centres, international gateways, VPN, operating systems for billing, HR & CRM have been transferred by GTL to GIL for cash.

GIL will now become a pure play telecom infrastructure company, while GTL will continue designing and building telecom networks for basic and cellular companies.

GIL’s business is expected to be capital-intensive, as the company will build telecom networks for GSM and CDMA operators. GIL will also build, operate and own infrastructure for BPO companies.

GIL will focus on wireless infrastructure management, which is emerging as a major business opportunity.

One of the problem cellular operators face is that they have to acquire rooftops in building, which are already crowded with equipment of rivals.

While the DoT has allowed the sharing of infrastructure among telecom companies, it has not taken off, as there are no independent companies to provide this service.

GIL will invest in acquiring these sites and then work on leasing and sharing it with multiple operators to get synergy of operations. Companies like American Tower and Crown Castle in US carry on such business.

According to company officials, GTL company is trying to improve the return on capital employed and hiving off the telecom assets into another company is expected to help in this regard.

Tata Consultancy Services (TCS) buys Chile firm for $23 million (Rs 105.8 crore)

9th November 2005: Tata Consultancy Services, the $2.2 billion software services provider, has acquired Comicrom, a BPO firm based in Chile, for $23 million (Rs 105.8 crore). Comicrom is an established player in the pension processing space in Latin America.

With this move, TCS has gained more muscle in this field after the recent $850 million deal with the Pearl Group of the UK for taking over its pension processing. This acquisition will further TCS' footprint in the Latin American market as it attempts to reach a turnover of $100 million in the continent by the end of 2006-07.

Comicrom comes to TCS with a topline of $35.5 million, adding to the $30 million TCS generates from its existing information technology services in that market. TCS also operates a 51:49 joint venture with Comicrom for IT services, and with this deal, the Indian firm takes full control of this business as well.

Comicrom's 1,200-odd employees will take TCS' regional staff strength to 2,000 and its client base to 100. The acquisition will also help TCS to deliver on its recent multi-million dollar deals with ABN AMRO and the Pearl Group.

Said S Ramadorai, CEO and MD, TCS, 'This acquisition is a further step in realising TCS' strategy of acquiring leadership in platform-based BPO for banking and insurance. It also expands TCS' capability in terms of becoming a full services player.'

N Chandrasekaran, TCS' global head of sales and operations, added, 'The acquisition will drive TCS' growing presence in the region's banking sector as Comicrom's local expertise combined with TCS' banking domain expertise and assets like Quartz and FNS will enable us to offer the entire range of IT and BPO services to banks in Latin America.'

According to TCS, Comicrom processes 67% and 55% of total premium payments per month for four of the seven pension funds and health insurance providers in the country, respectively. 'In addition, the firm has 57% market share of the cheque processing business in Chile and counts more than 70% of banks operating in Chile as its customers.'

Federal Bank, Lord Krishna Bank (LKB) merger in trouble

7th November 2005: Deal may fall through if today’s meeting fails to sort out price differences. Federal Bank and Lord Krishna Bank top brass are meeting on Monday to take a final view on the proposed merger of LKB with the former. The two Kerala-based banks have so far failed to reconcile their differences over valuation and the merger proposal is likely to be called off if no headway is made at the meeting.

Federal Bank was willing to pay a maximum of close to Rs 300 crore for acquiring LKB, about two-thirds of what was sought by LKB. The asking price is nearly thrice the book value of Rs 16.95 per share of LKB. “If LKB does not come down from its stance, the merger proposal is unlikely to go through. Even though the bank has improved its health over the last two years, Federal Bank is not willing to pay the price LKB is demanding,” said a source familiar with the development.

The boards of the two banks formally announced the proposal last month as otherwise no due diligence exercise could have been made by Federal Bank for LKB. “After the exercise, Federal is not willing the raise the price which LKB was hoping to get,” the sources said. The boards of Federal Bank and LKB gave in-principle approvals in early October for considering the merger of the two banks if the outcome of the due diligence, valuation and other related studies are found acceptable to both the banks and subject to other necessary approvals.

The acquisition was proposed to be a stock-cum-cash deal. This would have kept Mohan Puri and related entities’ stake in the merged entity below the permissible maximum of 10%. Mohan Puri and related entities together hold about 63% stake in LKB.

LKB posted a net loss of Rs 21.76 crore in 2004-05. Federal Bank’s net profit last year was Rs 90.08 crore. Federal Bank’s capital adequacy ratio (CAR) in March 2005 was 11.27%, while LKB’s CAR was 11.74%. LKB’s net non-performing asset last year was 4.22 and that of Federal Bank was 2.21%.

Federal Bank has a network of 456 branches covering almost all the important cities in the country with a dominant presence in Kerala with 339 branches. It has a strong franchise in retail banking; NRI business segment and SME segment. Lord Krishna Bank has a branch network of 112 spread across 11 States and the Union territory of Chandigarh.

The seeds of its expansion were sown in the 1960s when three commercial banks were merged with it. Today, Lord Krishna Bank has a nation-wide network of 112 branches. With a core value of providing personalised customer services, it has transformed itself into a modern, completely computerised, bank.

A couple of years ago, Lord Krishna Bank was faced with a crisis when its main shareholder Ashwini Puri, who once controlled a 65% stake in the bank, was murdered in a luxury hotel in Luanda, the capital of Angola.

He went there to set up a factory in collaboration with the Angolan government to manufacture leather shoes for the country’s armed forces under the banner of his business group - Mohan Exports. Mohan Puri, his son, took over the reins. He is expected to retain a 10% share in the merged entity.