India's Reliance Communications (RLCM.NS) has shelved a planned Singapore initial public offering by its undersea cable unit to raise up to $1 billion, with unfavorable market conditions dealing a blow to its efforts to ease a heavy debt load.
The company will "await supportive market conditions and easing of prevailing global uncertainties to proceed with the offering/listing at an appropriate time in the future," Reliance Communications said in a statement late on Friday.
Burdened with net debt of $7 billion as of March 31, the company controlled by billionaire Anil Ambani was looking to raise between $700 million and $1 billion from the listing of its undersea cable assets through a business trust in Singapore.
"It is hugely negative for the company. It would be very tricky for them to raise money now and reduce the debt," said Juergen Maiar, an Austria-based fund manager with Raiffeisen Euroasien Aktien that owns Indian shares worth $200 million but sold its Reliance Communications holdings a few years ago.
The Singapore trust, called GTI Trust, was offering a dividend yield of as much as 11.5 percent, higher than that offered by peers, but that didn't attract enough investor interest. The institutional bookbuilding period for the IPO was extended twice this week.
"You can give them some benefit of the fact that the demand for equities globally is extremely weak," said Eric Mookherjee, a Paris-based fund manager for Shanti India, which owns about $300 million of Indian shares and previously held convertible debt in Reliance Communications.
"But the fact that they still went ahead with it shows how badly they need cash," he said.
A source with direct knowledge of the matter who declined to be identified said the order book had not been fully covered by the end of Friday despite commitments from Singapore state investor Temasek TEM.UL, state-owned China Investment Corp CIC.UL and Middle Eastern funds.
The stalled IPO is the latest in a string of unsuccessful attempts at asset sales by India's No.2 mobile phone carrier by subscribers.
It has been trying to raise about $3 billion by selling its telecoms tower assets but has not struck a deal. In 2008 and 2009 it had tried to spin off the tower business in an IPO.
Reliance Communications secured $1.2 billion in loans from Chinese state banks early this year to repay overseas convertible debt due in March.
"Maybe they would get some Chinese money again, but otherwise it is going to be difficult for them to raise money," Maiar said.
Meanwhile, fierce competition in India, the world's second-biggest mobile phone market, has hurt Reliance Communications, which reported an unexpected increase in profits for the three months to March, after 10 straight quarters of decline.
Ahead of the announcement, Reliance Communications shares closed 0.3 percent lower in Mumbai trading at 63.75 rupees, valuing the company at about $2.4 billion. The stock price is now less than a tenth of its peak in 2008.
Deutsche Bank (DBKGn.DE), Standard Chartered (STAN.L), Singapore's DBS (DBSM.SI) and Industrial and Commercial Bank of China (1398.HK) were the advisors for the public offering.