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| Edited By: Lison Joseph |Source: DNA |Updated: Mar 18, 2018, 02:26 AM IST
Essar group will get $5 billion for the 33% stake in Vodafone Essar that it is selling to Vodafone, and not a penny more.
Essar has already approached the Reserve Bank of India (RBI) for requisite approvals to transfer shares representing 10.97% equity ownership at a valuation of $1.2 billion — as valued by the 2007 shareholder agreement.
Essar’s 33% ownership is held in two parts — an Indian subsidiary (Essar Telecommunication Holdings Pvt Ltd) holding 10.97% and a Mauritius-based non-resident entity (Essar Communications (Mauritius) Ltd) holding 22.03%.
On Friday, at least three Indian newspapers reported that Vodafone and Essar are on a collision course again with Essar demanding more money from Vodafone for the shares it held.
One had even reported that Essar would seek up to $700 million additional payment from Vodafone citing an RBI regulation that defines a particular formula for valuing Indian company holding in unlisted joint ventures with foreign companies.
Late on Friday, however, Essar issued a statement saying it “fully intends to honour all its rights and obligations under the various agreements with Vodafone and also expects Vodafone to do the same. This will be done in accordance with all applicable laws and regulatory approvals.”
“Essar continues to be a shareholder in Vodafone Essar Ltd. with all its rights and obligations until the transaction is concluded, which is expected by the end of November,” the statement further added.
In response to a DNA query, Vodafone spokesperson Simon Gordon reiterated that the 22.03% stake and 10.97% stake were together valued at $5 billion, implying no additional payout was involved.
In 2007, when Vodafone entered India by acquiring a 67% stake in Hutchison Essar for $11 billion, it gave Essar an undertaking to buy the 33% that Essar then held, at a guaranteed price of $5 billion.
Under the shareholder agreement reached between the two, Essar had a one-year window between May 7, 2010 and May 8, 2011 sell the 33% stake to Vodafone.
Before agreeing to sell the 33% to Vodafone, Essar had sought to merge Essar Telecommunication Holdings Pvt Ltd with Bombay Stock Exchange-listed India Securities Ltd, in a bid to see if it could get a higher valuation for that portion than what Vodafone would pay.
