India’s Essar Group is, according to Dow Jones Newswires, inviting bids from advisory banks in preparation for an IPO of its stake in JV Vodafone Essar. UK-based mobile giant Vodafone bought a controlling stake in Hutchison Whampoa’s mobile business in…
India’s Essar Group is, according to Dow Jones Newswires, inviting bids from advisory banks in preparation for an IPO of its stake in JV Vodafone Essar.
UK-based mobile giant Vodafone bought a controlling stake in Hutchison Whampoa’s mobile business in India in 2007. Essar was an existing shareholder in Hutchison’s business and Vodafone inherited a relationship with the Indian conglomerate, which was turned into a formal joint venture.
Essar now wants out, and is trying to exercise its option to sell its stake in the telecom venture to Vodafone for US$5bn between the third and fourth years of the deal’s completion.
The Indian conglomerate is considering selling all or part of its stake in Vodafone Essar according to Dow Jones, which cited four unnamed bankers that had been approached in a potential deal. They see an IPO as the obvious exit strategy for Essar, which has to find a way out of the partnership by May 2011.
However, Indian regulations forbid a foreign company from holding more than 74% in a local telecoms company, and therefore Essar is unable to sell its entire stake to Vodafone.
Vodafone Group controls 67% and Essar owns 33% of the mobile operator, which has more than 106 million customers in India.
Two of the bankers said the bidding process has already begun and will continue into the week. When TelecomFinance contacted Essar Group they said it is not company policy to comment on market speculation. Vodafone was unavailable for comment.
