Reliance Communications scraps undersea assets IPO

Reliance Communications Ltd. on Friday pulled the initial public offering of a unit that holds its undersea cable assets, adding to a string of large IPOs that have been scrapped in Asia this year.

Reliance said in a statement that it would list the unit at a later date when there were more “supportive market conditions and easing of prevailing global uncertainties.” The company, which is India’s second-largest mobile-phone operator by customers, didn’t elaborate on a time frame for a subsequent IPO.
Reliance had hoped to raise between $700 million and $1 billion by selling shares in Global Telecommunications Infrastructure Trust on the Singapore stock exchange, according to people familiar with the deal. Book-building for the IPO had been going on for nearly two weeks and had been extended at least twice. It was set to end on Friday.
However, the IPO got only tepid demand from institutional investors amid weak market conditions, a person familiar with the matter said Friday. Had it gone through, the IPO would have been the largest such offering in Singapore this year.
Its cancellation underscores the skittishness of investors toward equity offerings in Asia in recent months. 
Earlier this year, motor sport franchise Formula One put off a $2.5 billion IPO in Singapore. In late May, a $1 billion IPO by U.K. jeweler Graff Diamonds Corp. was scrapped in Hong Kong, again due to poor market conditions.
To entice investors, Reliance was offering a yield of around 11.5% on its trust, a person with knowledge of the deal said on Friday. This would be nearly twice the average yield being paid by business trusts and real-estate investment trusts in Singapore.
The Reliance trust owns an undersea cable network, which carries telecommunication signals across more than 68,000 kilometers in Asia, the Middle East, Europe and the U.S., the company website said.
Some large investors, including Investment Corp. of Dubai, China Investment Corp. and Singapore state-owned fund Temasek Holdings, had committed money to the IPO, two people familiar with the discussions said on Thursday.
But one person said on Friday that the investors’ commitments were lower than expected at $200 million. “There is a big hole,” this person said. The person declined to say what the gap was between what institutional investors had committed and Reliance’s target.
This is a big setback for Reliance Communications, owned by billionaire Anil Ambani. The company needed the IPO funds to cut its massive debt, which stood at $6.58 billion as of March 31, according to company data.
This was the second time that Reliance had tried to raise cash from its undersea assets. It abandoned such an attempt in 2009 due to valuation differences. In 2011, the company was talking to private-equity firms like Carlyle Group LP and Blackstone Group LP to sell a substantial stake in its tower unit, Reliance Infratel Ltd., according to people familiar with the matter then. But nothing came of it, according to them.