Essar may seek more for sale of stake in Vodafone Essar

8 Apr 2011

Indian multinational conglomerate the Essar Group is expected to press for an additional USD600 million to USD700 million from the UK’s Vodafone Group in relation to the latter’s acquisition of Essar’s stake in local mobile network operator Vodafone Essar. According to India’s Economic Times, which cited people familiar with the matter, Essar is planning to invoke a Reserve Bank of India (RBI) resolution that stipulates a minimum value for Indian shares in privately held companies. Under an April 2010 RBI resolution it is mandated that Indian shares in privately-held firms must be valued using the discounted cash flow method; doing so would value Essar’s stake in the cellco at around USD1.9 billion, compared to the purchase option that sets the value at USD1.2 billion. Commenting on the latest development Vodafone Group spokesman Simon Gordon said: ‘We are mindful of the new Reserve Bank of India guidelines and fully expect the current transaction to comply with them.’

As previously reported by CommsUpdate, at the end of last month it was claimed that the Essar Group had exercised its put option over 22% of Vodafone Essar, while Vodafone had in turn exercised its own call option to buy the Indian company’s remaining 11% holding in the cellco. The transaction will boost Vodafone Group’s holding in Vodafone Essar to around 75% and the deal is expected to close by November 2011 at the latest.

India, Vodafone Group, Vodafone India