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Monday, January 24, 2011

Essar Group hits back at Vodafone

The Essar Group accused its partner Vodafone of abusing the legal process to prevent the discovery of the fair value of its stake in Vodafone Essar Ltd (VEL), hitting back at the UK-based company's allegations of wrongdoing.
On Tuesday, Vodafone, the world's largest telecom service provider by revenue, said that it had written to the Securities and Exchange Board of India (Sebi) and the stock exchanges, asking them to investigate allegedly questionable activities carried out by Essar-controlled listed entity India Securities Ltd (ISL). Vodafone has alleged insider trading by ISL as well as improper disclosures made by the firm.
Vodafone could not be reached in London by e-mail or phone for its response as of press time. The company is objecting to Essar's proposal to merge Essar Telecommunications Holdings Private Limited (ETHPL), which has an 11% stake in Vodafone-Essar, with ISL in order to discover the “fair market value of its stake in the joint venture. Vodafone said that the demerger will distort the true value of the stake.
The Ruia-controlled Essar said Vodafone's allegations were baseless.
Vodafone-Essar is the third-largest telecom operator in India with over 124 million mobile subscribers. Vodafone had bought a stake of nearly 67% from Hutchison in 2007 while Essar has the rest.
“The merger scheme between India Securities Ltd and ETHPL is fully compliant with all applicable Indian laws, capital and financial sector regulations”, Essar said in a statement.
Vodafone, which has sought to intervene in the proceedings governing the merger scheme in the Madras high court, is neither a shareholder nor a creditor of any of these companies and has no legal capacity to challenge this merger, it said.
“Its objections to the merger are motivated and factually incorrect. The purpose behind raising these objections is to prevent the discovery of the fair market value of Vodafone-Essar, as envisaged in the agreements between Vodafone and Essar”, Essar said.
“Last year when the Essar group wanted to list Vodafone Essar by offering its shares through an initial public offer, Vodafone ensured that the IPO did not go through and no market value could be established”, the Essar statement said.
“The court process is being sought to be abused through the attempt to intervene and file objections”, it said.
“Vodafone is attempting to force Essar out of joint venture (VEL) and own 100% of India's third-largest telecom service provider at an artificially depressed value”, the statement added.
(Source - livemint)