This story is from August 11, 2006

Ruias to buy Orascom's stake

Baiju Kalesh & Partha Sinha / TNN / Aug 11, 2006, 00:09 IST

Share

AA

Text Size

Small
Medium
Large

Investment banking sources close to the Ruias of Essar say the company is tying up funds to buy Orascom's 12% stake in the joint venture.

MUMBAI: Even as the court case between Hutchison Essar (Hutch) and BPL Mobile over their merger drags on, a dramatic new twist to the tale is emerging.
Investment banking sources close to the Ruias of Essar say the company is tying up funds to buy Orascom's 12% stake in the joint venture. At current valuations, buying Orascom out could cost Essar something in the region of $1-1.1 billion.
If the plan goes through, it will increase Essar's holding in the joint venture from 33% to 45%, sources say.Essar will then have a more active role to play in the management of the company.
They also added that reports of Hutch exiting the country by selling its stake to Essar is "stretched imagination." To put that in perspective, consider this: In June, the Hindujas had sold their 5.11% stake in Hutch to Hutchison Whampoa for $450 million.

Using the same valuation parameter, Hutch would be worth nearly $9 billion and the Hong Kong company's 67% stake, held directly and indirectly, would fetch nearly $6 billion.
Although Hutch has not disclosed the total debt outstanding in its books as of now, it is believed to be at nearly $1 billion.
If we take this debt component out of the total value of Hutch, the equity value of the JV comes to about $8 billion and Hutchison's value in the same at about $5.4 billion.
So if the Ruias intend to buy Hutchison out of the JV, they would have to shell out this money which in Indian rupee terms translates to a little over Rs 25,000 crore. "They cannot raise this kind of money," the sources added.

End of Article

FOLLOW US ON SOCIAL MEDIA