The Department of Telecom is yet to resolve the compensation process for the holders of American Depository Receipts (ADR) of the erstwhile VSNL when surplus land of the entity is hived off into a new company.
According to Government officials, DoT is considering a number of options to accommodate the ADR holders.
This includes selling the land and giving cash to the ADR holders or listing the new company with identical shareholding pattern as that of VSNL.
One of the issues that the department will have to resolve is whether to consider only those ADR holders who were there at the time of disinvestment or also include the current holders.
ADR holders currently account for about 7 per cent of VSNL. When the Government had divested VSNL's majority stake to the Tatas, ADR holders held about 13 per cent share in the company.
In 2002, VSNL's majority stake was acquired by the Tata Group. But VSNL's 773 acres, spread over five locations in Delhi, Kolkata, Chennai and Pune, were not part of the deal.
“The surplus land (of VSNL) was not part of the agreement with Tatas but it certainly was included to value VSNL when it issued ADRs,” said a market analyst.
“Therefore if the land is now demerged into a new entity, ADR holders and minority stakeholders have to be compensated.”
Law Ministry opinion
The Telecom Commission has sought the opinion of the Law Ministry on the proposed hiving off of the 773 acres into a new company.
As Tata Communication is listed on the Bombay Stock Exchange and the New York Stock Exchange, legal advice is being sought on whether the resultant company also needs to be listed.
In any event, both the exchanges and the US Securities Exchange Commission have to be notified on DoT's intention to start in this regard.
The DoT had proposed to hive-off the surplus land held by VSNL into a separate company to unlock the value by selling it.
However, the process hit rough weather with Tatas raising a number of issues, including clarity on who will bear the cost (stamp duties and so on) of creating the new company.
Tracking shares
A former VSNL official said: “DoT should have given tracking shares to ADR holders at the time of disinvestment. The problem for DoT is that no such tracking shares were given which makes it difficult now to mirror the pre-disinvestment shareholding structure.”