RELIANCE INFO TO PLACE U.S. $ 1 BILLION WITH PRIVATE EQUITY INVESTORS

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Reliance Infocomm is close to placing an estimated $1bn worth of equity with three foreign investors -- Capital International, Government of Singapore Investment Corporation and Nomura -- according to market sources. However, sources close to Reliance denied the news, saying any deal was at least a month or two away.

Reliance Info has recently entered into negotiations with foreign equity investors like Government of Singapore, Temasek, Citigroup Private Equity and several others. Microsoft, too, is said to have shown an interest in investing in Reliance Info. According to sources, only the first round of negotiations with potential investors have taken place so far. "We are looking at investors only, not partners," said a source.

According to market information, Reliance Info is looking to place around 10% equity. The company is said to be hoping to raise around Rs 5,000 crore through this route, which works out to a valuation of around Rs 60,000 crore, said industry observers. This equity is being raised to fund Phase II of its project, which will increase the coverage for its cellular services to about 5,000 towns across the country. The company currently covers 1,100 towns in the country. In the wireline segment, it is entering the enterprise broadband segment in a big way.

The company is looking at raising a mix of equity and debt. The debt is likely to be either in the form of external commercial borrowing (ECB) or domestic debt. For equity, the company is considering investments by private equity players, FIIs, telcos and other strategic players.

Reliance Info's plans of an IPO have been put on hold for now since the company is looking at alternative sources of raising equity. "The IPO will be within a year's time,'' said a source. The company had completed financial closure for Phase I of the project in October '03 when it tied up debt of Rs 5,000 crore with a clutch of institutions and banks. The debt : equity ratio is around 1:2, with the equity being brought in by Reliance Industries (45%), the family (45%) and Trusts holding about 10%.

The Reliance logic is they are not just in the voice game. "In the long term, only about 25% of our revenues will be from telecom," said a source.

The majority of our revenues will come from data, data centres, worldwide connectivity (through Flag) and areas like the WebWorlds,'' said a source. Reliance is the largest data centre operator in the country today.

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