In what could be the biggest management buyout ever in India, a group of employees of Tata Teleservices Ltd (TTSL), led by Mukund Govind Rajan, Chief Ethics Officer, Tata Sons, has pitched for buying out the Tatas from the company.
The bid, understood to be a little over $1 billion, is backed by a consortium of Private Equity (PE) investors led by bulge-bracket PE firm, TPG Capital, and includes a major pension fund, according to sources in TTSL who wished to remain anonymous. Tata Sons reached an agreement with Airtel to merge TTSL’s consumer mobile business with Airtel in October last year. TTSL is now left with the fibre and enterprise businesses.
Mukund Rajan was the Managing Director of TTSL from 2008 to 2010 and has also served on the board of Tata Communications Ltd (TCL), which has also expressed interest in acquiring TTSL.
Fears of job losses
It is understood that fears of job losses prompted senior, long-serving employees of TTSL to band together and approach Mukund Rajan to spearhead the offer. So, one of the two promises that the MBO team has made is that it will retain all jobs.
The second is that it will honour all partnership agreements that TTSL now has with TCL. The latter was concerned over the fate of the agreements that prompted it to consider a bid for TTSL. An MBO, if it indeed goes through, will be a first for the Tata group. It is understood that Tata Sons Chairman N Chandrasekharan is not averse to trying out new ideas in his endeavour to streamline the group and consolidate its businesses.
Decision likely next month
N Srinath, Managing Director of TTSL, is understood to have told employees in a townhall last week that a decision on the sale would be made by mid-February, at the latest. According to an analyst tracking the Tata group, it would be difficult for TTSL’s board to overlook the MBO offer, especially because it promises to protect jobs, something the Tatas have always prided themselves on.
The $1 billion-plus offer may also be difficult to reject as Chandrasekharan has promised to backstop all money owed to lenders by TTSL and the deal with Airtel for the mobile business does not result in any cash inflow, analysts said.
Sources in TTSL pointed out that the offer would bring fresh money into the company and the country while the TCL bid will only result in money passing from one hand to another for the Tata group.
Asked for its reaction, Tata Tele’s spokesperson said that responses would be given by Tata Sons; the latter’s spokesperson said that they had no comment. Mukund Rajan refused to comment.