Essar to transfer part of Vodafone Essar stake to overseas investment company

15 Jan 2010

The Essar Group has announced plans to indirectly transfer 2.63% of its economic interest in mobile network operator Vodafone Essar to its overseas investment company, according to the Economic Times. Under the proposals the Essar Group will transfer its 49% stake in Essar Telecommunications Holding (ETHPL), which has a 10.97% stake in the cellco, to Mauritius-based Essar Telecom India (ETIL) for INR5.3 billion (USD116 million). The investment switch will be allowed by using the provisions of the relaxed foreign investment norms issued last year, under which foreign investment of less than 50% in an Indian investing company will not be treated as foreign direct investment (FDI) as long as Indian citizens have a 50% stake and the right to appoint a majority of directors in the investing company. The Essar Group currently holds a 33.02% stake in Vodafone Essar, with 22% of that held through ETIL, which is treated as foreign investment. The remainder is held by ETHPL, and under existing regulations is treated as Indian ownership. The proposed transaction will see ETIL acquire a 49% stake in Essar Capital Holdings (India) (ECHL) for INR2.8 billion, and a further 49% stake in Essar Satvision (India), which is owned by ECHL, for INR2.5 billion. ECHL and Essar Satvision will then subsequently purchase a 49% stake in ETHPL.

India, Vodafone India