Second Coming

Norwegian telecom giant Telenor sprang a surprise on October 26, when it disclosed its new Indian partner, a relatively unknown entity called Lakshdeep Investments & Finance Pvt Ltd. It is a financial investment company controlled by Sudhir Vrundavandas Valia, the 56-year-old Executive Director of pharma major Sun Pharma. “It is a financial investment by Mr Valia in his personal capacity,”clarified Telenor. Valia, a chartered accountant by training, is the brother-in-law of Sun Pharma’s Managing Director Dilip S. Shanghvi.

Telenor’s new wholly-owned Indian unit Telewings Communications has signed a partnership agreement with Valia’s company. Lakshdeep will infuse equity into Telewings after it is awarded the licence and buys 2G spectrum to operate in India. Confident and articulate, Valia concedes that telecom is unchartered terrain for him but believes that Telewings was a compelling business proposition. “It is true that this is a new sector for us, but we want to diversify,” he says.

There is a 74 per cent ceiling on foreign direct investment in telecom and, therefore, Telenor needs an Indian partner. Valia will only be a financial investor with Telenor retaining management control of Telewings. “We wanted a partner who was comfortable with allowing Telenor Group to have full management control,” says a Telenor spokesperson.

For a 26 per cent stake in Telewings, analysts estimate that Valia will have to fork out anywhere between `2,000 to `2,500 crore. “It is not necessary for all funds to come through equity. Some newspapers have calculated `2,000 crore but it is not decided,” says Valia. This implies that the company may also raise substantial debt along with an equity infusion. “Much of the money brought in by the investor will be used to pay for the licence and spectrum,”says Rahul Singh, Head of Equity Research, StanChart.

Telenor had earlier picked up a 67 per cent stake in a telecom company promoted by real estate major Unitech. However, the venture ran into trouble after the Supreme Court cancelled all 2G licences allotted to companies on or after January 2008. Telenor and Unitech subsequently decided to part ways.

Valia asserts that Lakshdeep has a diverse investment portfolio and the resources to invest a substantial amount in Telewings.“We have several investments in sectors like power, real estate, finance and pharma and we get returns from there,” he says, while refusing to divulge the net worth or the size of Lakshdeep Investments’ portfolio.

It remains to be seen though whether Telenor will have better luck in its second innings in India with Valia on board.