UK-based telecom giant Vodafone and Indian investor Analjit Singh may buy Essar’s 33% stake in their joint venture, Vodafone Essar, reported the Economic Times. Vodafone Essar is 60%-owned by the Vodafone Group, 33% by Indian conglomerate Essar and 7% by…
UK-based telecom giant Vodafone and Indian investor Analjit Singh may buy Essar’s 33% stake in their joint venture, Vodafone Essar, reported the Economic Times.
Vodafone Essar is 60%-owned by the Vodafone Group, 33% by Indian conglomerate Essar and 7% by Singh. The UK company has the option to buy Essar’s entire stake by May this year.
But under India’s foreign direct investment (FDI) rules for the telecoms sector, a foreign company is prohibited from owning more than 74% in an Indian operator unless it teams up with a domestic partner.
This rumour comes in the wake of Vodafone criticising plans by Essar to carry out a reverse listing of its telecom business because it may affect the value of their JV.
Essar is looking to merge unlisted Essar Telecommunications, which owns an 11% stake in Vodafone Essar, with listed India Securities (ISL).
However, according to Vodafone, ISL is a highly illiquid vehicle, with more than 95% of the shares under the control of Essar Group. Accordingly, small amounts of buying or selling could distort ISL’s share price, it said in a statement.
The British telco added that such a reverse listing could be misinterpreted as a fair market value of Vodafone Essar, adding that it did not wish for a company in which it holds a majority interest to become the subject of a false market.
But in a notice to the Bombay Stock Exchange, ISL hit back saying that has no locus standi to oppose it since it is neither a shareholder nor a creditor of both Essar Telecommunications and ISL.
In the meantime, according to a JP Morgan report cited by local newspapers, Essar’s stake in Vodafone Essar is worth about US$2bn – much less than the US$5bn envisaged in the 2007 shareholders’ agreement between the two companies.
