Vodafone opposes Essar's stake transfer to group co

MUMBAI: British telecom major Vodafone Group Plc said on Tuesday that it has raised objections regarding its Indian partner Essar's plans to transfer 11% stake to another listed group firm-India Securities Ltd. The Ruia family owned Essar holds 33% in Vodafone Essar.
"Vodafone has written to both the BSE and Sebi to express its concerns regarding reverse listing of Essar Telecommunications Holdings Private Ltd (which owns an indirect 11% in Vodafone-Essar) into India Securities and has asked for the matter to be examined," Vodafone said in a statement.
Signaling that all may not be well between the two partners, at least when it comes to valuing the business, an Essar group spokesman said that it is studying the communication and will respond appropriately. "Vodafone is neither a shareholder nor a creditor of India Securities Ltd or Essar Telecommunications Holdings Private Ltd and as such has nothing to do with this merger scheme," the spokesman said.
Vodafone's concerns also stem from Essar's plans to value a stake in their Indian mobile phone operator. "Vodafone does not wish a company in which it holds a majority interest to become the subject of a false market. Vodafone is concerned that the value of ISL could be misinterpreted as a fair market value of Vodafone Essar," the statement said. Vodafone also said that there had been no disclosure to the shareholders of ISL on Vodafone Essar, which would become a substantial asset of ISL.
Therefore the investors in ISL have no basis on which to form a valuation judgement. Vodafone bought a 67% stake in Hutchison Essar for $10.7 billion in 2007.