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Event: According to media reports, Unitech (UT) has moved a local court in Gurgaon
to prevent the rights issue of Uninor, which is UT’s JV with Telenor for telecom
business in India. As per the reports, the board of Uninor had passed a resolution
permitting the company to raise additional capital through a rights issue.
Background: UT had bagged the Unified Access Services Licensing (UASL) post a
controversial process which is now being investigated. Post receipt of the 2G licence
and spectrum, the company had entered in to a JV with Telenor (Norway) wherein
the latter had infused additional capital (~INR 61 bn for a 67.25% stake) and would
be responsible for the roll out and day–to-day operations of the company. As of
December 2010, Uninor has a subscriber base of ~12.25 mn across India.
The process under which UT (among other winning bidders) won the licence has
come under a cloud and the Supreme Court of India is expected to issue a judgment
on the legality of the same. The process of awarding of licences is being investigated
by the Central Bureau of Investigation (CBI).
Impact: As of now, there is little clarity on the issue. However, on the positive side,
it signifies Telenor’s commitment to its Indian JV. On the flipside, it indicates possible
differences between Telenor and UT, which have come out in the public domain.
We have valued UT’s stake in Uninor at INR 8/share (book value of UT investment,
post holdco discount). We believe there is uncertainty on the impact of the liability on
UT in case the licence is cancelled or a penalty is imposed.
Outlook and valuations: Our SOTP-based fair value for UT is INR 83/share.
However, we currently have a ‘HOLD/Sector Underperformer’
recommendation/rating on the stock on account of uncertainty surrounding the 2G
case and the large promoter stock that is pledged (65% of promoter holding).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Event: According to media reports, Unitech (UT) has moved a local court in Gurgaon
to prevent the rights issue of Uninor, which is UT’s JV with Telenor for telecom
business in India. As per the reports, the board of Uninor had passed a resolution
permitting the company to raise additional capital through a rights issue.
Background: UT had bagged the Unified Access Services Licensing (UASL) post a
controversial process which is now being investigated. Post receipt of the 2G licence
and spectrum, the company had entered in to a JV with Telenor (Norway) wherein
the latter had infused additional capital (~INR 61 bn for a 67.25% stake) and would
be responsible for the roll out and day–to-day operations of the company. As of
December 2010, Uninor has a subscriber base of ~12.25 mn across India.
The process under which UT (among other winning bidders) won the licence has
come under a cloud and the Supreme Court of India is expected to issue a judgment
on the legality of the same. The process of awarding of licences is being investigated
by the Central Bureau of Investigation (CBI).
Impact: As of now, there is little clarity on the issue. However, on the positive side,
it signifies Telenor’s commitment to its Indian JV. On the flipside, it indicates possible
differences between Telenor and UT, which have come out in the public domain.
We have valued UT’s stake in Uninor at INR 8/share (book value of UT investment,
post holdco discount). We believe there is uncertainty on the impact of the liability on
UT in case the licence is cancelled or a penalty is imposed.
Outlook and valuations: Our SOTP-based fair value for UT is INR 83/share.
However, we currently have a ‘HOLD/Sector Underperformer’
recommendation/rating on the stock on account of uncertainty surrounding the 2G
case and the large promoter stock that is pledged (65% of promoter holding).
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