Going, going…

Ever since the B.K. Modi promoted Spice Communications got listed on the stock exchanges last year, several Dalal Street brokers have been advising their clients to buy the share. Reason? It would soon become an acquisition target. In the first week of June, that hope wasn’t belied when Modi told shareholders at the company’s annual general meeting that he was open to selling his stake of 40.8 per cent, but not below Rs 60.

Several telecom companies, including Aditya Birla Group’s Idea Cellular and Bahrain Telecommunications Co, have shown interest in picking up Modi’s holding. But before they buy the stake, Spice’s other main shareholder, Telekom Malaysia, which holds 39.2 per cent, would need to give its nod. Modi is even awaiting a proposal from the Malaysian telco. However, even if Telekom Malaysia has to increase its stake, it can at the most buy 34 per cent, as a foreign telco cannot hold more than 74 per cent stake in a local telecom firm. So, Modi needs to find another buyer if he wants to exit the company.

Analysts think it will be better for Modi to sell his stake to an existing player with an all-India presence rather than to a new player. But the talk in investment banking circles is that Idea Cellular wants to buy Modi’s as well as Telekom Malaysia’s stake. In turn, Telekom Malaysia will take a stake in Idea.

The price being offered by Idea is around Rs 58 a share, a source aware of the deal said. A spokesperson for the Aditya Birla Group declined to comment. The market expectation is that the deal may happen at Rs 70-77 a share. But that may be too high an expectation, as the share price was steadily coming down after Modi’s AGM statement.

At the time of writing, it was Rs 53.20, down 11 per cent since the beginning of the month.

—Virendra Verma