PowerGrid to lease out towers to telcos

A move that would result in the re-rating of the company’s valuation, PowerGrid Corporation of India (PGCIL), the largest and one of the best-managed transmission utilities firm, is planning to lease out 80% of the towers to telecom companies, which in turn will make it one of the leading telecom tower companies in the country.

The proposal is based on the report prepared by consulting firm Booz & Company, which was appointed by the company to evaluate its diversification plan. It has identified nearly 1,20,000 towers out of 1,50,000 towers capable of carrying both telecom airwaves and high voltage current without interrupting each other, said two executives familiar with the development. However, these towers will be leased out in phases. SK Chaturvedi, chairman and managing director at PGCIL, said the company has planned to venture into non-regulated businesses such as providing telecom infrastructure without any fresh capital expenditure. “Due to the nature of its business, PGCIL’s entire revenue is currently regulated where return on capital is fixed similar to the pension fund.” he added. Without divulging details, Mr Chaturvedi said that a proposal to this effect would be presented in the forthcoming board meeting, which is slated to take place by the end of this month or early next month. The company has appointed PricewaterhouseCoopers as its second consultant to prepare the details of the financial feasibility and draft agreement, which will help it to enter into a tie-up with prospective telecom companies. “The report will be submitted shortly, which will be subsequently presented in the next board meeting for approval,” said one of the executives. “As per the report of Booz & Company, leasing out 15,000-20,000 towers will increase the company’s profitability by as much as `500 crore. Once all the (identified) towers are leased out, they would generate profit, which is likely to be more than the current profit. In the last fiscal, PGCIL had earned a net profit of `2,041 crore and a revenue of `7,127 crore,” said the other executive. PGCIL was trading at Rs 101.9 per share on Friday and the company’s market capitalisation was `42,867 crore. In comparison to some of the recent deals, the proposed tower business of the company is expected to re-rate the entire company, said a leading merchant banker familiar with development. In the recent deal of Reliance Infratel and GTL, Reliance Communications had announced that the merged entity with 82,500 towers will be valued at `50,000 crore. In 2009, Citigroup had divested its minority stake in Bharti Infratel at $50 million valuing Bharti Infratel at around $10 billion.