RCOM’s 95% subsidiary, RITL plans to raise money by diluting ~10% (postissue) equity. A successful IPO would help RCOM de-leverage its consolidated balance sheet, and may result in some valuation rerating.

This is a significant development post valuation of Aircel’s Tower Business taken over by GTL Infra at Rs 8,000 cr for 17,500 towers which will help RCom raise its sagging fortunes and command better valuations. GTL Infra will earn blended monthly rental of Rs 27,600 per site from Aircel, escalated at 3% p.a. This is inline with Indus (~Rs29K).

We note that tower assets are getting higher valuation multiples than telecom services business, given tower demand from new wireless entrants, potential 3G deployments and lower risk profile of tower assets (more predictable cash flows).