Tata Sons has moved to acquire a total of 69.35% stake in listed telecom firm Tejas Networks in a deal which will bolster the conglomerate Tata group’s 5G capacity.
The deal will see Tata Sons affiliate Panatone Finvest subscribe to equity shares and warrants cumulatively amounting to Rs 1,884 crore, excluding the open offer for 26% of the outstanding shares that the Tatas will also have to make.
Panatone is acquiring the shares at Rs 258 apiece, at a premium to Wednesday’s closing price at Rs 234 per share.
Tejas shares rose 4.99% to hit Rs 244 a piece on Thursday morning.
Tejas said that the capital from the Tatas will be utilised to invest organically and inorganically in research and development, sales and marketing, people, infrastructure and to enhance manufacturing and operational capabilities.
The telecom firm said it sees a “very large opportunity” in the telecom sector both in India and global markets with the new cycle of investments in 5G and fibre-based broadband rollouts.
“We are excited to partner with Tejas, India’s leading telecom and network company with a strong DNA of R&D. We look forward to working with the highly experienced management team of Tejas and creating a full stack of globally competitive wireline and wireless products,” Saurabh Agrawal, executive director of Tata Sons Pvt Ltd, said.
The contours of the deal involve Panatone investing an initial sum of Rs 500 crore to subscribe to equity shares at Rs 258 apiece amounting to 17.14% of Tejas.
Tejas is also making a preferential allotment of warrants with a 11 month validity amounting to Rs 950 crore which will shore up Tatas’ stake in Tejas to up to 37.49%, according to the exchange filings.
While this will immediately trigger an open offer for 26% of the outstanding shares, Tejas is allotting a second set of warrants amounting to Rs 400 crore which may be exercised by Panatone one year from the date of allotment.
Should Panatone choose to exercise all the warrants before 18 months from the date of allotment, it will acquire 43.35% in Tejas excluding the open offer that it will have to make.
The preferential allotment of the equity shares and warrants has been approved by the board of directors of Tejas and the transactions are subject to shareholders’ approval and other customary closing conditions and approvals, the firm said.
“This association provides us the necessary financial resources, global relationships and strong ecosystem to innovate and scale our business,” V Balakrishnan, chairman of Tejas, said.
Sanjay Nayak shall continue as managing director and chief executive of Tejas along with the existing management through the next phase of growth.
“The association with Tata group will accelerate the realisation of this vision and enable us to address the large market opportunity available to us to build a financially strong global company, backed by a trusted brand. I am fully committed to making this a success and am excited about the next phase of our journey,” Nayak said.
Kotak Mahindra Capital Company is acting as the manager to the open offer and Khaitan & Co is acting as the legal advisor to the transaction.