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Hutchison to buy Hinduja stake in JV

Hindujas have virtually decided to sell their 5.1% stake in Hutch-Essar for an estimated up to $450 mn.

india Updated: Jun 16, 2006 17:56 IST

Hindujas have virtually decided to sell their 5.1 per cent stake in mobile company Hutch-Essar to Hong Kong-based Hutchison Telecommunications International Ltd for an estimated up to $450 million (Rs 2025 crore), an agreement for which could be announced next week.

The Hong-Kong based firm has pipped Indian partner Essar in the mobile company for the strategic acquisition of Hinduja TMT stake, for which the two sides have now deployed their lawyers and investment advisors to work out finer details.

The deal is being given final touches based on a valuation of the unlisted Indian JV -- Hutchison Essar -- between eight-nine billion dollar, done by some national and international investment bankers, including IndusInd investment banking, which is also the advisor for Hinduja TMT, sources associated with the process said.

The acquisition would take Hutchison Telecommunications International Ltd's direct holding to almost 48 per cent in Hutchison Essar. HTIL is a subsidiary of Hutchison Whampoa. The Ruias of Essar group hold 33.6 per cent in the company.

Hutchison Essar is India's third-ranked mobile operator by virtue of its 18.06 million GSM customers. In comparison, top ranked Bharti Airtel Ltd has 21.86 million GSM customers and second-ranked Reliance Communications Ltd has 21.5 million wireless services customers.

The valuation of Hutchison-Essar is also being done keeping in mind the valuation of the GSM businesses of the listed entities Bharti and Reliance Communications. Sources said this could value Hinduja TMT's holding between 400 to 450 million dollars and a final figure would be arrived at after experts and advisors go through final due-diligence.

In October last year, Essar had bought 3.2 per cent stake in the company, then Hutchison Max, from Max India's Analjit Singh for 147 million USD. Although initially Ruias were willing to increase their stake to 38 per cent, now they have backed out.

This stake sale by the Hindujas, combined with the consolidation of the shareholding in Hutchison Essar in the last one year, would now pave the way for the company's listing on the Indian bourses.

Earlier in March this year, Kotak Mahindra Bank, one of the initial investors in Hutch's India telecom venture, had sold its 8.33 per cent stake in Hutchison Essar to Analjit Singh and Telecom Investments India (TIIL) for Rs 1,019 crore.

TIIL is a Hutch group company controlled by Asim Ghosh, who is the MD of Hutchison Essar and a representative of the Hong Kong company.

Egyptian cellular major Orascom also holds a 10.3 per cent stake in Hutchison Essar. However, Orascom holds this stake indirectly through another Hutchison Whampoa company, which in turn holds a stake in the Indian telecom entity.

First Published: Jun 16, 2006 17:19 IST