After massive networth erosion, Tata Tele seeks Rs 29,000-cr debt recast

Tata Teleservices, the loss-making telecom services provider of the Tata group, had asked banks to restructure loans worth Rs 29,000 crore following a Rs 11,650 crore erosion in its net worth in 2016-17, banking sources said. 

Tata Teleservices joins Anil Ambani-owned Reliance Communications in seeking a bailout from banks since the launch of services by Reliance Jio.

According to bankers, Tata Teleservices and its listed subsidiary Tata Teleservices (Maharashtra) have asked banks to extend the maturity of loans to 20 years in line with the tenure of their licences and spectrum. Besides, Tata Teleservices has sought a loan of Rs 5,000 crore to bridge its cash flow and meet capital expenditure.

Tata Teleservices reported a net loss of Rs 2,839 crore in 2016-17, bigger than its loss of Rs 2,023 crore in the previous year. Promoter Tata Sons has invested Rs 6,500 crore as quasi-equity in the last three years so that Tata Teleservices can meet its liabilities to banks.

Tata Teleservices had started showing signs of a revival in the first half of 2016-17, but the launch of free services by Reliance Jio from October pushed the company back into bigger losses.

The Tata Teleservices spokesperson declined to comment on the matter of the loan recast.

The Tata group company’s turnover declined to Rs 9,666 crore in 2016-17 from Rs 10,708 crore in the previous year. Bankers said Tata Teleservices’ promoters would have to keep investing in its equity to meet liabilities.

Tata Teleservices is not the only telecom company that struggled during 2016-17. The Aditya Birla group’s Idea Cellular posted a loss of Rs 400 crore in 2016-17 against a Rs 2,728 crore profit in 2015-16. Sales and profits of the top two players, Bharti Airtel and Vodafone, also declined during the year.

Bankers said they were not worried about Tata Teleservices’ debt service coverage ratio of 0.18 as Tata Sons had always stepped in to pay bank loans. Tata Teleservices’ earnings before interest, tax and depreciation fell to Rs 1,341 crore in 2016-17 from Rs 1,700 crore a year ago.

Tata Sons director Ishaat Hussain met the telecom minister along with CEOs of other telecom companies on Thursday seeking a reduction in the financial burden on the industry.

Tata Teleservices’ sale of a part of its stake in tower company Viom Networks for Rs 2,800 crore helped it meet some of its liabilities last year. Tata Sons was expected to invest another Rs 2,000 crore in the company in 2017-18, bankers said.

Earlier this month, Reliance Communications received a seven-month loan repayment moratorium. This was after the company informed banks about the sagging financials of the telecom sector since the entry of Mukesh Ambani’s Reliance Jio. Reliance Communications also said high spectrum fees, licence charges and finance costs had made the sector unviable.

The industry is also witnessing consolidation with Vodafone and Idea Cellular merging to become India’s largest telecom company.

Signalling poor financials

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