* Undersea cable unit forecast to raise $1.4 bln
* Unit's listing to be biggest IPO in Asia this year
* Proceeds to be used to cut debt of Reliance Comm
(Adds analyst comment, updates shares)
By Devidutta Tripathy and Sumeet Chatterjee
NEW DELHI/MUMBAI, April 10 The undersea cable
unit of India's Reliance Communications Ltd has
received initial approval for its $1.4 billion listing in
Singapore, said a source with direct knowledge of the deal,
paving the way for Asia's biggest IPO this year.
The unit has received an 'in principle' approval for listing
on the Singapore exchange as a business trust and the proceeds
will be used to reduce the debt of the parent, the source said,
declining to be named as details are not public yet.
A successful offering by the unit, which operates one of the
world's largest private undersea cable networks, will be a major
relief for beleaguered Reliance Communications which has seen
its fair share of failed deals.
India's No.2 mobile operator, controlled by billionaire Anil
Ambani, is struggling with $6.9 billion in debt and has posted
10 consecutive quarters of profit decline amid fierce
The share offering could be launched in this quarter and its
proceeds will be about 70 billion rupees ($1.4 billion), the
Reliance Communications said in a statement on Tuesday it
was evaluating an IPO in Singapore of its undersea cable unit
through a business trust. A spokesman for the company declined
to elaborate. The Singapore exchange declined to comment.
The IPO will be the biggest in Asia this year, ahead of
China Communications Construction's $794 million
Shanghai listing and Tesco's $600 million property fund
listing in Thailand, according to Thomson Reuters data.
Reliance Communications plans to sell 75 percent of the
wholly owned unit in the offer.
The business trust route will help Reliance Communications
to publicly float a large chunk of its shares without changes in
By listing in Singapore, the unit can also take advantage of
some of the most attractive rules for listing a business trust.
Business trusts contain assets that pay regular dividends, most
of which are distributed to shareholders.
"We won't be surprised to see Reliance coming here with a
similar model to Hutchison to benefit from the tax scheme here,"
said Ng Kian Teck, lead analyst at SIAS Research in Singapore.
Hutchison Port Holdings Trust, controlled by Hong
Kong billionaire Li Ka-shing's Hutchison Whampoa,
last year raised $5.5 billion through a business trust listing
Ng said investors would look out for what the proceeds would
be used for and the percentage stake that Reliance
Communications will be selling in the offering.
"If you are selling a substantial stake, that's a red flag.
Investors will be quite cautious - are you selling a lemon?"
The unit will begin approaching IPO cornerstone investors
starting this week, said a second source with direct knowledge
of the matter.
Successful deals have been few and far between for Reliance
Communications. A hoped-for IPO of its telecoms tower unit
failed to take off and a planned sale of the business has
dragged on for nearly two years
The mobile operator was forced to tap Chinese banks earlier
this year for loans to repay about $1.2 billion in overseas
convertible bonds that were due for redemption last month.
The undersea cable unit has hired Deutsche Bank,
Standard Chartered, DBS and Industrial and
Commercial Bank of China as advisers for the public
offering of shares.
The unit had 386 customers at the end of December that
include Internet service providers and mobile carriers. Its
operations cover six of the eight major global data traffic
routes and nine data centres, the company's website showed.
Shares in Reliance Communications, valued by the market at
$3.4 billion, ended 3.2 percent higher on Tuesday at 85.65
rupees, while the broader Mumbai market rose 0.2
The stock is up more than 22 percent in 2012, outperforming
a 13.4 percent rise in the broader market.
(Additional reporting by Saeed Azhar and Charmian Kok in
SINGAPORE; Editing by Muralikumar Anantharaman)