MUMBAI: In a major restructuring exercise, Hathway Cable and Datacom has decided to spin off its cable TV business into a wholly owned subsidiary while retaining the broadband business in the parent company.
This is a change in direction from the company’s earlier plan to move out the broadband business to a wholly owned subsidiary. Hathway had announced a demerger scheme to put the broadband business in Hathway Broadband Pvt Ltd (HBPL).
Now the reverse is going to take place. The parent company will hold the broadband business, which is highly profitable. The cable TV business will be carved out and housed in a wholly owned subsidiary, Hathway Datacom Central Pvt Ltd.
In a way, this signals the confidence the company’s owners have in the broadband business. Also important is the value of the cable TV business, which will be retained within Hathway Cable and Datacom through the wholly owned subsidiary and can also attract separate investors.
Explaining the rationale, Hathway has said that broadband is the primary growth driver of the business; hence it is preferable to retain the potentially more profitable business in the parent entity. “Public Investors will benefit from direct stake in the parent entity housing the high growth potential business. Transfer of cable business to the wholly owned subsidiary would retain the value within Hathawy Cable and Datacom,” the company stated.
The cable TV business will be consolidated under Hathway Datacom Central. The consolidation will result in reduction of costs and bring about operational rationalisation, Hathway said. There will also be reduction in inter-company transactions, the company further explained.
Salient points in board meeting
Hathway Cable and Datacom, in its board meeting on 12 January, approved withdrawal of the demerger scheme of its broadband business into Hathway Broadband Pvt Ltd.
Hathway rescinded the earlier board decision taken on 26 May 2016 to merge its three wholly owned subsidiaries into the company.
Hathway’s board, in its meeting on Thursday, gave in-principle approval for spin off the cable TV business into the company’s wholly owned subsidiary – Hathway Datacom Central Private Limited.
The board also gave in-principle nod to five subsidiaries of the company to spin off their respective cable TV business into Hathway Datacom Central Private Limited.
Explaining the rationale for separation of businesses, Hathway said that this would enable focused attention on each of them. “It will create independent structures for future fund raising,” the company further explained.