Essar may cut Hutchison holding
The move is to bring the joint holding within 74 per cent foreign direct holding stipulation, reports M Rajendran.Updated: Apr 05, 2007, 23:00 IST
Essar is mulling to reduce its 22 per cent foreign holding in Hutchison Essar Ltd held through its Mauritius subsidiary, to seven per cent, which is important for Vodafone and Essar to be compliant with the 74 per cent foreign direct holding allowed for telecom sector in India.
Currently, Essar Group holds the 33 per cent in Hutchison Essar Ltd. In the 33 per cent, Mauritius subsidiary holds 22 per cent and the 11 per cent is held by the Ruia family and friends.
However, with Vodafone insisting that it had valued the deal at $11.1 billion for acquiring 67 per cent interest in Hutch Essar of which 52 per cent is direct and 15 per cent is held by Hutchison Telecommunications International Ltd’s (HTIL) existing Indian partners Asim Ghosh, Analjit Singh and Infrastructure Development Finance Company Ltd (IDFC), the total foreign holding for Vodafone and Essar could go up to 89 per cent. (52+15+22=89).
A senior official in Legal department of Department of Telecommunications (DoT) said, “It is for both parties to decide what they do. But, legally in such matters, the holding structure is taken into account at the time of signing the agreement and not post-facto. They have to convince not only DoT, but also all the agencies that the total FDI is only 74 per cent, if they fail, the whole deal could run into trouble.”
Vodafone is insisting on considering the 15 per cent stake as part of the deal since, the burden of risk and rewards to these companies will lie with them, claimed a Vodafone official in India.
Essar spokesperson when contacted said, “We have never considered any such plan (to reduce the 22 per cent foreign holding) and we also do not consider the 15 per cent held by Asim Ghosh, Analjit Singh and IDFC as foreign, so there is no issue of 89 per cent FDI.”
While Vodafone officials in UK insisted that it would be entitled subsequently, directly and indirectly, to acquire shares in TII and Omega which are Indian companies as and when it is allowed by the foreign direct investment guideline. Vodafone will then own a 67 per cent interest that would be a foreign holding in Hutchison Essar, though it points only after the regulatory approvals are received.
Speaking to Hindustan Times from London, Ben Padvoan, head of Corporate and Financial Media relations Vodafone Plc said, “We are happy with the current dialogue between Indian government and us. We did expect such queries, but are confident that the whole process would be completed by June end.”
When quizzed about the details sought by Indian government on all its global operations Padavon said, “ I cannot comment on a specific query, but I would like to stress that Vodafone has been providing all the information that the government has sought and would be providing them in future."