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MUMBAI, Feb. 5

THE Tatas would be acquiring the 25 per cent equity stake in Videsh Sanchar Nigam Ltd (VSNL), through a Special Purpose Vehicle (SPV). The main participant companies in the SPV, will be the Tata Group's main holding company, Tata Sons, and Tata Power, though the full consortium includes Tata Steel and Tata Industries.

Word at Bombay House is that Tata Industries, widely seen as the Group's holding company for new businesses, may not be exposed much to the VSNL stake, as ``the amount involved is large.''

At Rs 202 per share quoted to win the bid, the Tatas are projected to incur a total investment of Rs 2,591 crore, composed of Rs 1,439 crore as payment to the Government in a few days' time and an estimated Rs 1,152 crore should the subsequent open offer for an additional 20 per cent of VSNL equity be fully subscribed to.

The funds are a mix of debt and equity.

``All the required funds have been tied up,'' Mr Kishore Chaukar, Managing Director, Tata Industries, said. Asked what the debt-equity ratio would be, Mr S.H. Rajadhyaksha, Senior Vice- President (Finance), Tata Industries, said, it was not an issue as the banks had taken a ``flexible approach.''

A public announcement would be made within four days from the date of signing the share price agreement. The open offer can be within a period of two months thereafter. Though the Government would continue to hold 26 per cent equity in VSNL, management control would be with the Tatas and they would have five directors on VSNL's 12-strong board, Mr Rajadhyaksha said. Commenting on the VSNL bid, Mr Ratan Tata, Chairman, Tata Group, said in an official statement: ``We are pleased to have been succesful in our bid for VSNL, which will facilitate the enhancement of the spectrum of our telecom services.''

Reading here is that most of the investment burden for the VSNL deal, will be borne by Tata Sons and Tata Power. The former gets 90 per cent of its income from Tata Consultancy Services (TCS) which functions as a division of Tata Sons. In 2000-2001, Tata Sons had a total income of Rs 3,322 crore, its forex earnings rising that year to Rs 2,914.02 crore.

Asked if the rising role of Tata Sons as the continued flagship for the Tatas in major acquisitions, could expedite TCS's plans to go public, the official spokesman of TCS declined comment. He also declined response on whether any private placement could precede the planned IPO or if the new developments would speed up TCS's evolution into a separate company from a division of Tata Sons that it is today.

Pathan defends bid

Our New Delhi Bureau reports: The IOC Chairman and Managing Director, Mr M. A.Pathan, has defended his aggressive bid for IBP Limited by saying that ``the other bidders had undervalued the stock''.

The company bid Rs 1,551.25 per share for acquiring a 33.6 per cent stake in IBP Ltd, over twice the prevailing market price and over thrice the reserve price of Rs 455 per share fixed by the Government. The next best bid came from Shell at Rs 804 per share.

He told Business Line that IOC had based its aggressive valuation on three counts. First, the potential loss that would have been incurred in case IBP had landed in private hands. ``Existing refining capacity to the tune of five million tonnes would have turned idle in case we had lost IBP,'' Mr Pathan said.

At present, of the 4 million tonnes of products sold annually by IBP, 2.8 million tonnes is sourced from IOC.

Second, the acquisition will provide a boost in terms of expanding its marketing network. At present, IOC's marketing network is growing at 300 retail outlets per annum. A third of IBP's 1539 outlets are located in `A' class cities.

Thirdly, IOC will now supply the remaining 1.2 million tonnes to IBP which the latter has been so far sourcing from Reliance Petroleum Limited (around 0.5 million tonnes), etc. The IOC chairman outlined some of these points in a presentation to the Petroleum Ministry.

On the issue of being debarred from bidding for Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd, Mr Pathan said that his company ``was never interested in acquiring a controlling stake in HPCL or BPCL.

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