A ministry of corporate affairs (MCA) report on equity structure of new telecom entrant Loop Telecom has put a question mark over the licence given to it in January 2009. The report says that the Essar group has funded Santa Trading Private Ltd (STPL) through non-convertible debentures (NCDs) to gain equity control Loop Telecom.
Essar group also has 9.9 per cent indirect holding in Local Loop. Essar group also owns close to 33 per cent equity in Vodafone-Essar. As per the licence conditions, a company or individual cannot own more than 10 per cent equity in more than one telecom service provider in a service area. The upshot: Essar group can not own more than 10 per cent equity in Loop Telecom.
The report says that STPL has a paid up capital of only Rs 1 lakh. However, the Essar group has invested Rs 1,592 crore in the company’s unsecured non convertible debentures (NCDs). “While Essar group is not an equity holder in STPL, it has invested a huge amount in its NCDs and it would appear that through the funding of STPL by Essar group, equity has been provided to BPL Communications who is a 48 per cent owner of Loop Telecom, though not directly to Loop Telecom.”
Loop Telecom was awarded a licence for providing telecom services in January last year along with Unitech, Sistema-Shyam, Swan and Datacom. Loop Telecom has refuted the charges and has said it had disclosed its equity structure to the government at the time of filing of application for licences.
“The shareholding structure of Loop Telecom has been provided to the department of telecommunications (DoT) at the time of issue of licence,” said a spokesperson of Loop Telecom. “The shareholding structure is fully compliant with relevant guidelines and we would work with DOT in case they have any clarification.”
“We have not yet seen MCA report so we will not be able to comment on it,” said a DoT official.