Reliance Infratel: Foreign minority shareholder moves tribunal

HSBC Daisy (Investments) Mauritius has filed a petition in the NCLT alleging mismanagement and oppression by the mobile phone tower firm.

Written by Khushboo Narayan | Mumbai | Published:November 2, 2016 1:19 am
anil ambani, Reliance Communications Ltd, private equity, HSBC Daisy, Reliance Communications Ltd (RCom), according to documents reviewed by The Indian Express, Anil Ambani, business news Anil Ambani

A foreign minority shareholder of Reliance Infratel has moved the National Company Law Tribunal (NCLT) alleging mismanagement and oppression by the mobile phone tower firm owned by the Anil Ambani led-Reliance Communications Ltd (RCom), according to documents reviewed by The Indian Express.

HSBC Daisy (Investments) Mauritius filed a petition in the NCLT last month under Section 397, 398 of the Companies Act 1956 said lawyers familiar with the development. Under Section 397, shareholders can appeal against the oppression of the interest of shareholders. They can complain against mismanagement in the company under Section 398.

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According to sources, the minority shareholders want more disclosure on the deal between RCom and Brookfield Infrastructure Group under which RCom will sell 51 per cent stake in its telecom tower business to Canada-based Brookfield Infrastructure, for an upfront cash payment of Rs 11,000 crore. “The minority shareholders also are concerned about the valuation of Reliance Infratel and have sought more disclosures on the deal,” said a source.

RCom holds 96 per cent stake in Reliance Infratel. With this stake sale, the minority shareholders too are looking to exit the firm. Institutional and minority investors including George Soros’ Quantum (M), HSBC Daisy Investment (Mauritius), Drawbridge Towers, NSR Partners, Galleon, Investment Partners B (Mauritius) had invested $287 million in Reliance Infratel in 2007.

RCom declined to comment on the case as the matter is sub judice. The case is expected to come up for hearing in December. While AZB and Partners is representing HSBC Daisy (Investments), Naik Naik & Company is advising Reliance Infratel in the case.

“The ongoing legal dispute will not affect the deal inked by RCom with Brookfield. It is an old dispute and the company has taken a legal opinion on the issue. According to that, this dispute will not affect any current or future deals of the company,” said a person aware of the ongoing case.

On October 14, RCom in a statement said it had signed a “non-binding term sheet” with Brookfield Infrastructure Group for the proposed sale of tower assets. The proposed transaction along with the recently-announced merger of RCom’s wireless business with Aircel – together is expected to reduce the company’s debt by nearly 60 per cent to Rs 17,000 crore, from about Rs 42,000 crore said sources. RCom will also enjoy 49 per cent future economic upside from the towers business, based on certain conditions, the company had said.

This is not the first time when RCom has signed a non-binding term sheet with an investor for paring stake in its tower business. In December, last year it signed a non-binding pact with Tillman Global Holdings LLC and TPG Asia Inc to sell its mobile phone tower business. The deal, however, collapsed after TPG withdrew from the talks over valuation differences.

According to the RCom- Brookfield proposed transaction, RCom will continue as an anchor tenant on the tower assets under a long-term MSA (master service agreement) for its integrated telecommunications business. “RCom and Brookfield expect considerable growth in tenancies based on increasing 4G offerings by all telecom operators, and the fast accelerating trends in data consumption, which are expected to contribute to significant growth in revenues and profitability for the towers business in the future,” the October 14 statement said.