As the proposed sale of majority stake in Hutch heads for a finale, all eyes are on the price that each bidder would offer for the asset.
NEW DELHI: As the proposed sale of majority stake in Hutchison Essar heads for a finale, all eyes are on the price that each bidder would offer for the asset. Egyptian major Orascom Telecommunications is also waiting to see the offer prices, before taking a decision on whether to bid or not.
Hong Kong-based Hutchison Telecom, which holds 67% along with its associates in Hutchison Essar, is targeting a valuation of $21-22 billion for the whole of India’s fourth largest mobile operator.
Orascom Telecom CEO Naguib Sawiris told DNA Money during the weekend, “We are waiting to see how high the offers will go.” He was replying to a question on whether Orascom had decided to bid. Orascom would prefer to increase its stake in HTIL rather than buy directly into Hutchison Essar.
The Egyptian company holds over 19% in HTIL, and thereby has an indirect 10% in the Indian company. The Indian government, however, is yet to give an assurance to Orascom that it can invest directly in India, according to Sawiris.
The Orascom CEO was part of an Egyptian delegation to New Delhi recently to seek an assurance from the Indian authorities that the company was welcome to do business in India. Its indirect stake in Hutchison Essar has been under scrutiny of the Indian government over security concerns because Orascom has telecom operations in Pakistan and Bangladesh, among other places.
However, an official of the department of telecommunications (DoT) has clarified that no special permissions are required for Orascom to invest in India. “Like others, it too has to follow Press Note 5 provisions,” the official said. But, if the foreign direct investment (FDI) level is over 49%, it will have to seek a nod from the Foreign Investment Promotion Board.
While an upcoming shareholders’ meet at the Hutchison headquarters is expected to be crucial for the Hutchison Essar sale, the due-diligence process by three players — Vodafone, Reliance Communications and Essar - has been completed. The fourth player in the race, the Hinduja group, will begin the process around January 24 or 25, sources said. Analysts said the Essar group’s proposal to increase its stake to own 100% of the company cannot be ruled out yet.
But the world’s largest mobile operator, Vodafone, remains the frontrunner. To operate in India, it will need an Indian partner with at least 26% stake. That partner could well be Essar, analysts suggest.
Meanwhile, there have been suggestions that bidders like Vodafone and Reliance Com may take an alternate route to pick up a stake in HTIL, rather than buying directly into Hutch. While in that case they would escape Essar’s right of first refusal (ROFR), they may have to face the ROFR of Orascom.
Meanwhile, another equity fund, US-based Apex Venture Partners, is believed to have joined the race for Hutch Essar. The company did not respond to the questionnaire sent by DNA Money on the issue.
A host of equity funds, including Texas Pacific, had shown enthusiasm for Hutch Essar earlier. But some of them found the valuation too steep and are believed to have opted out. Another buzz that has been doing the rounds is that Orascom may pick up 10% in Bharti once Vodafone exits the venture. But Sawiris flatly denied any such move.
On the other hand, Singapore’s SingTel, which holds over 30% in Bharti, is keen to increase its stake in the company.
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