Mumbai, July 4: Essar Teleholdings Ltd, the investment arm of Essar Group for all its telephony ventures, has increased its stake in Hutchison Essar by 3.43 per cent to 30.42 per cent for a consideration of Rs 267 crore.

“The acquisition is part of our decision to enhance our stake in the consolidated entity and reflects the strong relationship between Essar and Hutch,” said Vikas Saraf, chief executive officer of Essar Teleholdings.

The deal is said to be part of the agreement it entered into with majority partner Hutchison Telecommunications, under which Essar Teleholdings had the option to purchase 3.43 per cent in Hutchison Essar from Usha Martin Telematics until June 30. Usha Martin Telematics is owned jointly by Kotak and Hutchison.

The Hutch-Essar combine, owned 3.26 per cent by Max India and 23 per cent by Kotak Mahindra group, is considering a public offer some time this year.

According to industry sources, Max and Kotak Mahindra might unlock their investments and leave before the offer.

Essar Teleholdings has been expanding its foothold in mobile phone services. It recently acquired a 9.9 per cent stake in BPL Mobile, which is locked in a battle for market share with Hutch-Essar in the lucrative Mumbai circle.

The Hutchison-Essar group has consolidated its mobile telephony business under a single entity, Hutchison Max Telecom, ahead of the planned initial public offer.

The revamp saw Hutchison Max Telecom being renamed Hutchison Essar, a firm with eight million subscribers.

The offer has been delayed because the government is yet to announce detailed guidelines on the hike in telecom foreign direct investment (FDI) ceiling to 74 per cent. Sources see it happening only in the third or fourth quarter of this year instead of June, as originally planned.

In the absence of rules on how telecom companies can raise their foreign investment, sources said it was not clear whether the 74 per cent limit includes the money ploughed in by foreign institutional investors (FIIs).

“There are other aspects where details are awaited. For instance, while the current regulations do not permit NRIs to hold key posts, it is expected that after the FDI hike, they would be allowed to do so,” they added.

This uncertainty had forced senior Hutchison Telecommunications International officials in Hong Kong to concede that the suspense would delay the flotation.

Hutchison Telecom International, owned by Hong Kong billionaire Li Ka-Shing's Hutchison Whampoa, is the main promoter of Hutchison in India.

The Essar group and Uday Kotak's Kotak Mahindra Group also own stakes. There are indications that the partners with smaller stakes could prefer to sell out of Hutch and invest the money released into businesses they find promising.