Anil?s Reliance eyes Hutch

A majority stake in Hutchison Essar Ltd is up for sale to global private equity firms, reports M Rajendran.

india Updated: Dec 08, 2006 02:07 IST

A majority stake in Hutchison Essar Ltd, the company that controls the Hutch brand of GSM telephony services in the country, is up for sale to global private equity firms. Anil Ambani's Reliance Communications Ltd (RCL), keen to get a foothold in GSM cellular services, may be a partner for them, a private industry source said on Thursday.

The source confirmed a report in the online edition of The Wall Street Journal that cited "people familiar with the matter", to assert that the wireless assets could be sold in a deal worth more than $8 - 12 billion (Rs 3600 - 5400 crore).

"There have been noises in the United States about the possibility of a stake being taken in the India operations of Hutch by two equity firms along with Reliance," the source, who asked not to be identified, told the Hindustan Times from Mumbai.

It is not yet clear who will be the sellers of the stakes in the joint venture led by India's Essar Group and Hong Kong billionaire Li Ka-shing's Hutchison group. In Hutchison Essar, Hutch Whampoa, Analjit Singh, Asim Ghosh and Orascom hold 67 per cent, while the Ruia promoted Essar holds 33 per cent.

The source, however, mentioned Texas Pacific Group (TPG) and Blackstone, among the heavyweights in the private equity industry hunting for big stakes in India, as likely buyers.

A Hutch spokesman in India had no comment. Blackstone officials could not be reached. A spokesman for the Anil Dhirubhai Ambani Group (ADAG) said: "We don't comment on market rumours." A spokesman for Newbridge Capital, the Indian arm of TPG, also offered no comment.

Industry analysts noted that on December 5, Sandip Das, Hutchison Essar's deputy managing director had quit to join Maxis Communications, which seemed to indicate an internal fissures in the company.

Essar was said to have raised questions over the entry of Egyptian telecom major Orascom as a stakeholder in the Indian operations.

They added that the stake sale seemed all the more probable because Reliance, which has been keen to break into GSM services to top its services based on rival CDMA technology, could be hunting to take over GSM assets, so as to rival Bharti Airtel Ltd., the country's leading GSM player.

If the deal goes through commercially, it will still have to grapple with regulatory requirements that restrict cross-holding of stakes across telecom circles, industry analysts say.

One analyst said about 60 per cent in Hutch's Indian assets could be up for sale to the consortium.

Ravi V Prasad, telecom analyst said, “Over the last few years private equity firms in India have benefited hugely from their investments in telecom and IT. There is possibility with robust telecom market they might look for a medium term investment.”

"RCL has been exploring ways to increase its foothold in telecom service using GSM. It has not been successful so far. Acquiring of Hutch makes business sense,” said Prasad.

Sri Rajan, partner, Bain and Company India, said, “The telecom sector in India particularly the wireless space has attracted a lot attention, as can be seen by the recent investments.

First Published: Dec 08, 2006 02:07 IST