Bharti ADR may help Warbug cut its stake

By SiliconIndia   |   Thursday, 22 July 2004, 07:00 Hrs
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MUMBAI: Bharti Tele-Ventures is likely to sponsor an American Depository Receipts (ADR) issue that would help Warburg Pincus and other shareholders to offload part of their stake in the international markets, reports a business daily.

This route, the daily said, ensures compliance with the 49% cap on foreign direct investment (FDI) in telcos.

However, the daily said, if the government relaxes the FDI limits or even allows foreign institutional investors (FIIs) to invest up to 74%, Bharti might issue fresh shares in the ADR that will bring money into the company.

The final structure is expected to evolve over the next few days once there is clarity on the FDI issue.

Through the ADR, Warburg is planning to sell 10% of its total 18% stake in Bharti, sources said. The size of the issue is expected to be in the region of $700m, making it the largest overseas float by an Indian company.

The issue size depends on the number of shareholders participating in the offer and whether the company goes in for a fresh issue.

According to merchant bankers, Bharti will have to give all its shareholders an equal option to offer their shares as part of the ADR issue.

They will be accepted on a proportionate basis keeping the 49% FDI cap in mind. Earlier, Infosys Technologies had invited its shareholders to participate in a sponsored ADR issue.

Deutsche Bank, Merrill Lynch and JP Morgan are likely to be the lead managers for the ADR. However, Bharti has yet to take a formal decision.

Bharti officials refused to comment. When contacted, Warburg Pincus was not available for comment. Bharti had announced plans for an ADR sometime ago, but has not been able to realise its plans due to the cap on 49% limit on foreign direct inflows.

Warburg has invested $293m in Bharti, while Singapore Telecommunications, which holds about 33% stake has invested $650m.

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