After selling out his cellular services firm Spice Communications to AV Birla-led Idea, BK Modi is now negotiating to sell out the mobile handsets business. Sony Ericsson is in talks to acquire Spice Mobiles, which sells mobile phones under the Spice brand. Spice Mobiles had revenues of Rs 127 crore with net profit of Rs 3.93 crore for the quarter ending March’08. The Economic Times reported that Modi has put a steep asking price of Rs 80-100 per share, which values Spice Mobiles at around Rs 700 crore.

This is more than three times the current price of Rs 24.95 for public listed Spice Mobiles. The stock is up 10 per cent today in early morning trade. The final price could be around Rs 50-60 per share if the Spice Communications deal is anything to go by where the final deal was struck at a price midway between the market price (at the time of deal negotiations) and the high asking price.

BK Modi directly owns about 64 per cent in Spice Mobiles which has a market cap of around Rs 195 crore. If the deal is struck at double the current price, Modis stake will be valued at around Rs 250 crore.

Initially, Spice Mobiles had approached Sony Ericsson, the world’s third-largest handset manufacturer, for a collaboration but the talks progressed towards an acquisition.

While the deal will trigger an open offer from Sony Ericsson, it is not clear if the global handset maker wants to acquire 100 per cent holding.

The deal will strengthen Sony Ericsson’s position in India here it was recently pipped by Samsung as the second largest player. A recent entrant in the Indian handset market Spice Mobiles has managed to garner some shares by offering cheap handset models. Spice sells around 2 lakh handsets a month while Sony Ericsson sells around 4 lakh units. A deal between the two would let Sony Ericsson regain its second position in India.

BK Modi also owns Cellebrum, a mobile value added services company, and Hot Spot, a handset retail chain. While Cellebrum may be listed as the capital markets situation improve.

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