Telecom major Reliance Communications has shelved a planned initial public offering of its undersea cable arm in Singapore which could have helped raise as much as $1 billion, due to poor response to the issue.
In a statement issued during the weekend, the firm said it will “await supportive market conditions and easing of prevailing global uncertainties to proceed with the offering/listing at an appropriate time in the future.”
The company’s stock was down over 3 per cent in early trades on Monday over renewed concerns over how will the firm reduce its debt burden.
The firm was looking to raise somewhere between $700 million and $1 billion through the issue of shares of a Singapore business trust Global Telecom Infrastructure Trust. The trust houses the company’s undersea cable business better known as Flag Telecom. It had filed a copy of preliminary prospectus for the issue with Monetary Authority of Singapore on July 5.
Deutsche Bank, Standard Chartered Bank, Singapore's DBS and Industrial and Commercial Bank of China were the advisors for the Singapore issue.
The institutional portion of the issue, which was opened on July 9 and was supposed to close on July 16, was extended twice before the company decided to pull out the issue altogether. The issue got a mixed response from investors despite offering a higher yield.
The plan to list the business with a large fund raising issue was seen as bold in the prevailing market conditions, but Reliance Communications had reportedly got commitments from some marquee investors including Singapore’s sovereign wealth fund Temasek. However, the decision to put off the issue shows the firm could not convince other investors to back it up at the valuation it was looking for.
This is expected to put pressure on the management on its debt overhang, which is pegged at around $7 billion.
The failed IPO of the undersea cable arm comes after several fund raising manoeuvres at the group level including proposed plans to spin off the telecom tower assets in India in a multi-billion dollar deal with GTL Infra, and also options to raise private equity money for the business. But these plans have not borne fruit.
(Edited by Prem Udayabhanu)