The roller-coaster man
Ask Manoj Gajanan Tirodkar who he is close to in industry and he is most likely to reply: "I have no friends." Those who work with him point out that he leads a simple life, works from nine to six, and then goes back to his home in south Mumbai's Colaba. But when this writer prodded him about his social circle, Tirodkar couldn't resist this quip: "I met Sunil Mittal a long time back when I was big and he was small — and later again when he became big and I was small."
That one line sums up Tirodkar's roller-coaster ride ever since he started a company called Global Tele-Systems to sell telecom equipment such as fax machines and telephones, in 1987, when he was in his mid-20s. Today, after making two multibillion-dollar acquisitions this year, Tirodkar is once again going up the roller-coaster to riches and the limelight.
With Lady luck smiling on him, Tirodkar could well be saying to himself: Who needs a friend when you have a great business partner? Last fortnight, the man who didn't go to college — he completed his schooling from a Marathi-medium school in Mumbai — cut the deal of his life when he bought into Anil Ambani's telecom towers business.
THE TIRODKAR DIARY
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That's the second big bang to come from the 46-year-old Tirodkar in just six months. In January this year, GTL Infra bought the tower business of mobile services provider Aircel for Rs 8,400 crore.
From any angle, the diminutive and stocky Tirodkar doesn't come across as an archetypal takeover artiste. His headquarters in Janmabhoomi Chambers in South Mumbai's old commercial district of Ballard Estate is unassuming.
And he shuns business suits, preferring the cool comfort of cotton shirts with two-buttoned pockets. But he loves reading the books of management guru Peter Drucker and legendary ex-CEO of General Electric, Jack Welch. Perhaps, Peter Lynch, who wrote One Up on Wall Street and Robert Shiller, author of Irrational Exuberance, should also find space on Tirodkar's bookshelf. After all, he knows a thing or two about stock markets. And he is no stranger to the rise and fall of fortunes brought about by irrational exuberance either — he was a beneficiary of the dotcom boom as well as a victim of the subsequent bust.
At the peak of the cycle in early 2000, the stock price of Global Tele-Systems — now clipped to GTL, perhaps, in a bid to bury the pain of the past — had climbed to an all-time high of Rs 2,212. The market value of the stock crossed Rs 15,000 crore at one time, running neck and neck with bellwethers like ITC and Hero Honda.
By March 2003, however, GTL's share price had sunk to Rs 53. Net profits had plunged from Rs 437 crore in fiscal year 2001 to Rs 111 crore a year later to Rs 83 crore by March 2003. GTL doubtless got burned because of the carnage in telecom and information technology sectors — its operations then included software and telecom engineering services, and enterprise networks.
But Tirodkar's problem was worsened by the fact that GTL (along with some other telecom and IT stocks like HFCL, Silverline and DSQ Software) got clubbed with the infamous K-10 bunch. The K stands for broker Ketan Parekh, the big bull during the boom, who defrauded banks to keep share prices up. Tirodkar came under the magnifying glass but was eventually exonerated by market regulator, the Securities & Exchange Board of India.
Shadow of Doubt
That Tirodkar was close to Dilip Pendse, then Managing Director of Tata Finance, who was accused of insider trading in 2001, didn't do much for his reputation. Result: Tirodkar and his operations were perceived — rightly or wrongly — to be dubious. "In the years after the scam, investors who lost money looked on him with suspicion,'' says an analyst with a domestic brokerage firm. And Tirodkar was forced to lie low for most part of the decade.
Tirodkar may have remained beneath the radar all those years, but he was still making important moves. Between the years ended March 2003 and March 2010, GTL's top line and net profits grew at a compounded average rate of 20 per cent and 14 per cent, respectively. The entrepreneur also found time to kick off new businesses.
The tower operations were carved out of GTL, which resulted in the birth of GTL Infra, with the flagship becoming a pure-play network services company. Other companies in the group today are Global Rural NetCo, which is wiring up buildings for better data transfer in a wireless environment; Global Towers, a tower manufacturer; Global Projects, a procurement and project services company; and Global InnovSource, a recruitment and staffing services firm. The size of the group's balance sheet is estimated at $5 billion and the market value of two listed companies is roughly $2 billion.
Interestingly, Tirodkar also has an aircraft maintenance company that services the planes of corporate tycoons, including the planes of Mukesh and Anil Ambani. The big question, however, is: How did Tirodkar finance his expansion spree? And the even bigger question is: How is he bankrolling the multi-billion dollar buyouts? "The money factor is grossly misconstrued," says Tirodkar. Why?
In 1999, Tirodkar sold his apparently flourishing e-commerce operation, called Global Electronics Commerce Services Ltd. to a clutch of investors, including Bank of America, UTI and T.RowePrice, at a valuation of Rs 4,500 crore. "Some of that money came to me, whilst the rest was used for building new businesses," he says. He's quick to add that GTL has not raised any money from the market since an initial public offering in 1994.
In fact, Tirodkar goes on to say that even after the recent huge investments, "we don't need money from the Indian capital market". That may smack of arrogance, but the canny entrepreneur appears to have more than one option to raise money. For starters, banks see few reasons not to lend to the GTL Group, with Deutsche Bank and half a dozen state-owned banks, including State Bank of India (SBI), having offered lines of credit for expansion and acquisitions. "He has a clear vision in the telecom services space," believes M.M. Agrawal, Deputy Managing Director, Axis Bank. And private equity majors such as Blackstone and Carlyle are said to be keen to invest in Tirodkar's companies.
So, how is he financing the acquisitions of Aircel's and Ambani's towers? For Aircel's towers, Tirodkar has taken a debt of Rs 5,000 crore and there is an equity infusion of Rs 3,400 crore by GTL, Global Holding Corp and GTL Infra. The Reliance deal has been structured differently. A person close to the transaction reveals that Reliance Infratel's debt of Rs 12,000 crore will be transferred to GTL Infra. Anil Ambani will get a 26 per cent stake in GTL Infra. Tirodkar will have to pay out some cash, and that amount will be finalised once the valuation exercise is completed in a few weeks.
Such transactions involving dollops of debt, equity and hard cash don't give Tirodkar sleepless nights — the group's net debt/equity ratio stands at 1.4, there is still an unused debt limit of Rs 3,500 crore (after tying up funds for the Aircel deal) and he's sitting pretty on a cash balance of at least Rs 2,500 crore. He can raise more debt as infrastructure companies can go up to a debt/equity ratio of three.
Tirodkar says he can easily mobilise Rs 15,000 crore by securitising the future earnings of his tower business since it has triple A-rated customers. "If we take Rs 2,000 crore revenue every year for 15 years with a three per cent escalation every year, we have a revenue pipeline of Rs 40,000-45, 000 crore," says Tirodkar.
The Rs 8,400 crore paid for Aircel's towers may seem a lot, but Tirodkar is confident of a huge payback. "The tower model is a self-financing one — just like roads that are financed by toll," says Tirodkar, as he explains the annuity-driven revenue model. "Rs 8,400 crore may look huge today, but over a 15-year period Aircel will be paying us between Rs 17,000 crore and Rs 22,000 crore," he says with a twinkle in his eye.
GTL Infra will earn rentals of Rs 700 crore in the first year, Rs 1,100 crore in the second, Rs 1,400 crore in the third and so on, for 15 years, from Aircel. And, of course, if another tenant comes on board, that's another bonanza. GTL Infra currently has operators like Vodafone, Bharti Airtel and Tata Tele using its towers. New revenue streams from wireless broadband services providers and radio stations are also possible.
"Our time has come," says Tirodkar, as he leans back in his chair. The upcoming rollout of third generation (3G) mobile phone services will throw up another huge opportunity. Tirodkar recently floated a company called Global Rural NetCo, which will take on the task of wiring up buildings for data transfer in the 3G era. This company achieved financial closure with a $1.2-billion loan from Axis Bank and IDBI Bank.
For now, though, towers is where the action is. "His towers will dwarf all his other businesses in terms of size," says Ajay Parmar, Head of Research at Emkay Global Research. Tirodkar clearly has reasons to be excited: He's created a huge asset that is at the threshold of generating whopping revenues and he's found a dependable ally in Anil Ambani. And this time around the exuberance appears more rational than in the past.
