In what can be termed as the biggest write-off by an Indian firm, CDMA service provider Tata Teleservices is planning to restructure the company to offset losses of around Rs 5,141 crore (Rs 51.41 billion) by way of capital revamp.
The unlisted company, which provides pan-India CDMA services except in Mumbai and Maharashtra circle, has sought approvals from the Delhi High Court for its planned restructuring process. This follows a shareholder approval that the company received at its extraordinary general meeting on September 8, 2008.
The company intends to restructure capital by writing off Rs 5,141 crore in losses and unabsorbed depreciation, according to minutes of the EGM. TTSL is believed to have incurred losses after making investments for capacity expansion in India.
The restructuring plan includes reducing Rs 1,967.71 crore (Rs 19.68 billion) from its share premium reserves on the balance sheet by writing off Rs 983.85 crore (Rs 9.84 billion) of book losses (through wiping out share premium) and Rs 983.85 crore of unabsorbed depreciation.
Similarly, TTSL will reduce Rs 1,586.78 crore (Rs 15.87 billion) from its book losses and Rs 1,586.78 crore against unabsorbed depreciation. When contacted, a company spokesperson said, "We have sought approval from the Delhi high court for our planned restructuring. As the matter is pending with the honourable court, we would not like to comment any further."
In its profit and loss statement for the financial year 2008, TTSL has stated losses of Rs 9,177 crore (Rs 91.77 billion). The company has reduced annual losses to Rs 1,813.76 crore (Rs 18.14 billion) for the year ended March 31, 2008 against Rs 2,062.52 crore (Rs 20.63 billion) recorded during the previous year.
By writing off losses and restructuring the company, TTSL might be looking at roping in a strategic investor - like Temasek Holdings - to make investments in the company. These investments may be used for the company's expansion plans in the country, according to industry analysts.
Temasek Holdings has 9.9 per cent and industrialist investor C Sivasankaran has around 9.7 per cent in the company. The remaining stake is held by Tata Sons and promoter groups.
TTSL had earlier proposed to invest close to $2 billion in expansion as the company had received permission from the Department of Telecommunications to provide GSM services in India.
