Vodafone CEO Arun Sarin ruled out any possible Indian public offer of shares by Hutch Essar. "We have the capital. There won't be an IPO," Sarin stated, on his arrival in the capital for the first time after Vodafone acquired a 67 per cent in the company three days ago.
Since foreign holding in any Indian telecom company is capped at 24 per cent, there is another hurdle if the Ruias decide to sell out. "In that case, we will find another Indian partner," Sarin said.
He reiterated that he wants the Ruia's, who own a third of the stake in Hutch Essar, to stay on as partners. "I have even sent them roses today, since it's Valentine's Day," he remarked.
However, Sarin made it clear that he had already paid a 'control premium' to Hutchison Telecommunications International (HTIL) for the majority stake. "An identical offer was also made to the Ruias," he pointed out.
He said there was no contradiction in making an offer for the Ruia stake and wanting them to stay on. "The offer was made in case they wished to leave."
But a relaxed-looking Sarin made it clear he would not be upping the offer for the rest of the stake. And that the nature of the partnership with the Ruias will be clearly on his terms.
"They hold 33 per cent. Clearly, that is much more than just an investment partnership. But in any partnership, the role is determined by the extent of the relative shareholding." Sarin said.
He also said Hutch Essar's current CEO Asim Ghosh will continue as CEO, though the Vodafone board will take a final decision on that.
Ghosh also holds 5 per cent share in Hutch Essar, which had been largely funded by Hutchison Telecom-related entities. "I borrowed the money to buy those shares. The underlying economic interest in those shares have been picked up by Vodafone, but I will continue to hold those shares," Ghosh said.
Sarin categorically ruled out any right of first refusal vesting with Essar, which could derail the acquisition. "That was based on the relationship with Hutchison Telecom. We believe, and we have legal opinion to support it, that it does not cover Vodafone," he asserted.
The Ruias have claimed that they held the right of first refusal on any transfer of the Hong Kong-based Hutchison telecom's interest in the joint venture.
Though Sarin declined to elaborate on the legal opinion, sources indicated that the agreement was applicable only to bids by certain Indian telecom firms.
Sources close to the Essar group have contested this and reports have indicated that they may go to court over the issue.
It also appears clear that once the acquisition process is complete and regulatory clearances obtained, which Sarin estimated could take a 'couple of months', Vodafone will begin the process of establishing its brand in India.