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Global Tele plans merger of unlisted group co

Ashok Jainani

MUMBAI, July 10

THE Rs.630-crore Global Telesystems Ltd (GTL) plans to merge a group company -- Global Electronic Commerce Service Ltd (GECS) -- with itself. The merger is expected to create one of the largest e-commerce entities in the country with a revenue of over Rs . 900 crores.

The GTL management has decided to convene a board meeting on July 18 to consider the acquisition/merger of the unlisted company.

GTL in a notice to the stock exchanges, said the board will also consider appointment of valuers, advisors and investment bankers to the deal.

The merger makes immense business sense as there is considerable synergy between their operations. The merger, valued at over Rs. 9,000 crores on conservative estimates, is set to create an e-commerce entity with combined revenue in excess of Rs. 900 cro res and profits from business in excess of Rs. 250 crores in fiscal 2000-01, according to sources.

If the deal, perhaps the largest in the recent times, goes through, would make GTL the country's largest e-commerce company in terms of revenue and perhaps among the top five in the world. The combined entity will have shareholders' funds in excess of Rs . 1,100 crores and equity holdings by foreign institutional investors (FIIs), NRIs/OCBs and domestic institutions in excess of 35 per cent.

GECS was valued at over Rs. 3,000 crores when FIIs and local funds picked up 26 per cent stake at a total cost of about Rs. 800 crores a couple of months ago. The investors in GECS's private placement of 4.4-crore shares at a price ranging from Rs. 250-3 00 per share include CSFB, Morgan Stanley, Zurich Tech Group, BankAm Private Equity and Unit Trust of India.

The GTL Executive Vice-Chairman, Mr. Manoj Tirodkar, told Business Line he could not comment on the swap ratio for the merger/acquisition. ``For the entire process of merger to be transparent, the boards of both the companies need to meet and independent ly decide on the valuation recommended by the appointed valuers,'' Mr. Tirodkar said. The valuation exercise may take about 4-6 weeks.

Of GTL's paid-up capital of Rs. 43 crores, the promoters hold 28 per cent, FIIs 25 per cent, NRIs/OCBs five per cent, domestic institutions and mutual funds 20 per cent and the public hold the rest. Of GECS's paid-up capital of Rs. 158 crores, the promot ers -- the Tirodkars and D'Silvas -- hold 38 per cent, the Singapore-based venture fund Technology Resources Ltd controlled by Kevalram Chanrai 33 per cent, FIIs 26 per cent and others hold nine per cent.

For the year ended March 2000, GTL had total income of Rs. 630 crores, with net profit from business of Rs. 109 crores. After considering extraordinary income of Rs. 119 crores, the total net profit was Rs. 228 crores. GECS, for the same period, recorded a revenue of Rs. 50 crores and cash profit of Rs. 23 crores. After considering depreciation of Rs. 17 crores, it recorded a net loss of Rs. 5 crores.