Tuesday, May 29, 2007

Ruias could use some sleep, badly !

Ruias must have been losing sleep ever since the Vodafone deal.

Good reason to think so since the Ruias are getting ready to *monetize* 33% that they hold in HutchEssar (now Vodafone Essar) – apparently to raise around $4.5 billion debt for overseas acquisitions (of non telcos).

“The fund-raising proposal will put the financing at a loan-to-value ratio of 82 per cent, which is quite high for a deal backed by shareholding in an unlisted company,” a banker reportedly said.
That's it...Ruias could use a safety valve. The deal is all about an unlisted company, valuation on paper, futuristic…ah, ever so many strings. Even as the deal was underway, several eyebrows have been raised over the stratospheric valuations offered to [HutchEssar] the unlisted, loss making telco having negative cash flows – purely on the basis of 22 m subscribers [ cost of acquisition = $ 852 per subscriber].

While there could be the buffered comfort of that put option, [which allows the Ruias to sell their 33 per cent stake in the company over the next 3-4 years in the open market at a minimum benchmark price] in the dog-eat-dog corporate world, you can’t sleep in peace unless you cash it all in – which Ruias are yet to - especially when the fortune has been a chance event, happened by bid frenzy instead of sweat and toil.

Is it blind leading the blind or a house divided against itself that hurried Ruias to monetize ?
Ruias could use some sleep, badly.

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