I have no doubt in my mind that Anil Ambani’s appetite for raising funds from the primary market is insatiable. Not so long ago, Reliance Power completed the country’s biggest public issue and now another company from the group Reliance Telecom Infrastructure (RTIL) is gearing up to raise nearly Rs 5,000-6,000 crore through an initial public offering.

Initial signs are that company has decided to file the draft red herring prospectus with the market regulator SEBI this week. The list of merchant bankers appointed for the IPO includes J P Morgan, Enam, UBS and ABN Amro. According to company sources, RTIL will sell nearly 10% of its post-issue share capital through the IPO which will put its valuation more than double of what it achieved in July when it privately placed 5% stake to a group of institutional investors.

<!--[if !supportEmptyParas]--><!--[endif]--> Point to be noted here is that RTIL is a 95% subsidiary of Reliance Communications (RCOM), sold the stake for Rs 1,400 crore to a host of investors including George Soros, HSBC, Fortress Capital, New Silk, Galleon, DA Capital and GLG Capital in a deal which had put its valuation at Rs 27,000 crore.

When one takes into consideration the size of the IPO, one thing is for sure that the equity valuation of RTIL, a company engaged in the business of building, owning and operating communications towers, will be around Rs 50,000-60,000 crore. According to my estimate, this will translate into nearly Rs 250-300 per RCOM share.

<!--[if !supportEmptyParas]--><!--[endif]--> The pivotal factor here is that RCOM demerged its tower assets in RTIL last year in a move, which was followed by most telecom companies in India. In terms of statistic, RTIL has a presence in all 23 telecom circles in the country. In addition, it has a 10-year master services agreement to provide passive telecom infrastructure to RCOM. Additional tenants in the form of external wireless operators on RTIL's towers will provide incremental growth for it.

According to sources, RTIL is putting in an investment of Rs 16,000 crore this year and is expected to pump in Rs 8,000 crore more next year. It has a minimum of four tenancy slots and it is in the process of upgrading this to host seven tenants by 2009. It expects to reach the one-lakh tenancy figure this week.

Shares of Reliance Communications Ltd. climbed as much as 7.7% today after a report that its subsidiary Reliance Telecom Infrastructure is planning to Rs50-60bn through an initial public offering (IPO).

About Reliance Communications:

Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group (ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock Exchange, it is India’s leading integrated telecommunication company with over 40 million customers.

The business of Reliance Communication encompasses a complete range of telecom services covering mobile and fixed line telephony. It includes broadband, national and international long distance services and data services along with an exhaustive range of value-added services and applications. 

Reliance Communications has a reliable, high-capacity, integrated (both wireless and wireline) and convergent (voice, data and video) digital network. It is capable of delivering a range of services spanning the entire infocomm (information and communication) value chain, including infrastructure and services — for enterprises as well as individuals, applications, and consulting.

Today, Reliance Communications is revolutionising the way India communicates and networks, truly bringing about a new way of life.