Rising share value behind Devas deal fall

In September 2009,Devas Multimedia’s board of directors increased the share capital of the company from Rs 17,50,000 to Rs 20,00,000 by the creation of 25,000 new shares of Rs 10 each.

The company’s three major foreign investors Deutsche Telekom Asia,Columbia Capital/Devas Mauritius and Telecom Devas Mauritius,holding 53 per cent of the stake in the company at this time were given 8400 and two lots of 525 new class C shares at a premium amount of Rs 1,26,821 per share on September 29,2009 according to details provided by Devas to the Registrar of Companies.

Deutche Telekom,which has a German government stake in it,was instrumental in pushing up valuation of Devas Multimedia in August 2008 when it picked up a 17 per cent stake of 28,349 shares at a cost of Rs 323.25 crore,put it among the top 25 FDIs in Karnataka in the last 10 years.

The premium on Rs 10 shares when private equity firms Columbia Capital and Telecom Ventures — a South Korea telecom backed company picked up 15,730 shares in May 2006 was Rs 21,445 per share. The two private equity firms in their Mauritius based alliance with Devas also picked up 11,978 preferential shares each in Devas Multimedia in June 2007.

In September 2009,following the increase in its share capital Devas also created a new Mauritius entity called the Devas Employees Mauritius Pvt Ltd and allotted 4,511 class D equity shares valued at Rs 7,012 to the new subsidiary.

The new entity and allotment of shares to it were a part of a decision taken by the Devas board on August 27,2009 to “set aside an option pool of 9423 class D equity shares’’ as part of stock option plans for employees,directors and consultants of the company.

The stock options would be held “indirectly through a Mauritius entity pursuant to signing a subscription agreement and the receipt of relevant approval under the FEMA,1999’’ the company has said in corporate filings for the period.

In August 2009 Devas Multimedia also made changes to its business objectives as listed under its memorandum of association. The company added the words Internet Services and Internet Protocol Television to modify the second objective in its MOA.

The modified document states the company’s objective is “to create,provide and operate infrastructure that includes internet services,internet protocol television,satellite capacity and transmission,terrestrial transmission and augmentation,satellite control and uplink,interconnection with terrestrial and mobile communication gateways,content aggregation and editing,service production,service management systems,network management systems and subscription management system’’.

In an explanatory note to the registrar of companies Devas has said that this recasting of business objectives was done since “it is felt that the ISP and IPTV activities can be conveniently combined with the current activities of the company and is permissible’’.