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Kerry Packer co acquires 10 pc stake in HFCL -- Two new ventures set up

Partha Ghosh

NEW DELHI, March 7

CONSOLIDATED Press Holdings Ltd (CPH) owned by the Australian business tycoon, Mr. Kerry Packer, has picked up 10 per cent equity in Himachal Futuristic Communication Ltd (HFCL) at a negotiated price of $238 millions.

An additional 71,65,650 equity shares of Rs. 10 each are being issued in favour of CPH through a preferential allotment. CPH has agreed to a price of Rs. 1,450 per equity share, amounting to foreign direct investment inflow of $238 millions (Rs. 1,039 cr ores) _ perhaps the largest FDI component in any telecom venture in the country. The FDI infusion is permitted through the automatic route and no FIPB permission is required.

Following the deal, the domestic promoters' stake in HFCL will marginally decrease to around 40 per cent and the equity share capital of the company will increase from around Rs. 71 crores to a little less than Rs. 80 crores, Mr. Mahendra Nahata, Managin g Director of HFCL, said at a news conference.

Additionally, CPH and HFCL are also setting up two joint venture firms _ one for software products and services and the other for B2B (business-to-business) e-commerce. In both the ventures, HFCL will hold a majority 51 per cent stake and CPH will have 3 0 per cent. The two companies are in the process of identifying strategic partners who can subscribe to the remaining 19 per cent stake in the two joint ventures.

Mr. Nahata said that in all likelihood, the third partner will be among vendors, trade partners or employees of the company. A final decision in this regard will be taken within a month, he added. An investment of around Rs. 100 crores has been proposed for the two ventures.

The joint venture for software products and services will focus on software services including animation software, software product development, IT-enabled services and embedded systems. ``HFCL's core strength in telecom and CPH's relationship with leadi ng technology companies and its own large requirements of software is expected to bring sizable business opportunities to this joint venture. The market opportunity coupled with the global strengths of both organisations will create one more strong playe r in the IT industry,'' Mr. Nahata said.

The B2B e-commerce joint venture will be investing in creating and developing network infrastructure across the country, including establishing payment gateways to support data and e-commerce services. This network will be content-rich, providing special ised solutions and services for specific business areas.

The joint venture expects to capitalise on the growing B2B e-commerce market in the country, taking advantage of the combined strengths of the two companies.

CPH is the holding company of Mr. Kerry Packer with large investments in media, telecom, e-commerce and entertainment business. The total asset base under the control of CPH is estimated at $10 billions. Its media business includes controlling interest i n Publishing and Broadcasting Ltd (PBL) _ which owns Channel 9, a TV channel. PBL also owns Australian Consolidated Press Ltd, which runs the largest magazine publishing business in Australia.

Mr. James D. Packer, Joint Chief Executive Officer of the Sydney-based CPH, and son of Mr. Kerry Packer, who was here today to sign the deal, said his company had identified India as a potential market for e-commerce and convergence of IT, telecom and co nsumer electronics technology and was looking forward to participate in the convergence and Internet revolution expected in the near future. He pointed out that initiatives of this nature had not yet been taken in other countries in Asia, including neigh bouring China.

Mr. Packer said he expected HFCL to induct a CPH nominee on its board shortly. He declined to comment on the company's business plans, including foray into the information and broadcasting, and entertainment arena.

HFCL to become debt-free

HFCL aims to become a zero-debt company within the next couple of months. The premium of the preferential allotment of 10 per cent equity in favour of CPH and the proceeds of a recent private placement of Rs. 1,050 crores will be used partly to retire de bts. Long-term debts amounted to Rs. 350 crores, according to Mr. Nahata.

Part of the proceeds will also be used to fund acquisition of stake in telecom service companies in circles and for working capital needs. Mr. Nahata said HFCL proposed to buy Essar group's 80 per cent stake in ECL Telecommunication Ltd for the Punjab ci rcle and a proposal was pending with the Government. HFCL's investment for the circle would not exceed Rs. 250 crores. In the long run, however, HFCL intended to bring down its holding in the company to around 40 per cent.