Singh: Deal driver

Mumbai, March 1: Analjit Singh of Max India has staged another comeback in Hutchison Essar Ltd (HEL) ? his second ? by acquiring an 8.33 per cent stake in the leading telecom service provider from Kotak Mahindra Bank for Rs 1,019 crore.

In April 1998, Singh had sold his 41 per cent stake in Hutchison Max Telecom to Telecom Investment, an indirect subsidiary of the Hong Kong-based parent Hutchison Telecom, for Rs 560 crore. Singh had bagged the Mumbai metro circle when telecom bids were invited by Sukh Ram in 1993 and made a killing with his stake sale in 1998.

Somewhere along the way he picked up a small stake of 3.16 per cent in the company again. He made another pile of money when he sold it off last October to the Essar group for Rs 657 crore.

Singh’s purchase of 8.33 per cent from Kotak Bank’s subsidiaries, associates and promoter group companies marks his second return to the telecom business and reflects the buoyant conditions in the sector.

Significantly, the deal values Hutchison Essar Ltd at over $6 billion, making it the second most valuable telecom company after Bharti Tele-Ventures Ltd. HEL is planning an initial public offering. Kotak Bank said in a press statement that the shares had been sold to Telecom Investment India, a holding company within the Max India group, and a company beneficially owned by Singh.

Kotak Bank’s consolidated share of the pre-tax profit on the sale is Rs 392 crore for the 3.19 per cent effective economic interest in HEL. The rest of the 8.33 per cent stake is held by various holding companies in the Kotak Mahindra group.

Uday Kotak, executive vice-chairman and managing director of Kotak Bank, said, “We were one of the early investors in the Indian telecom sector and take immense pride in the development of Hutchison Essar Limited as one of the leading telecom companies in India. We have enjoyed a very fruitful association with Hutchison and Hutchison Essar and wish them success in future.”

However, the sale could come as a disappointment to the Essar group since it has been keen on raising its stake in HEL. The Essar group is now the largest shareholder in HEL with a stake of over 33 per cent. Hutchison’s effective stake in the company is around 26 per cent, sources said.

The Essar group has been gradually raising its stake in HEL. In March last year, it acquired 4 per cent from various Kotak companies to increase its stake from 26 per cent to 30 per cent. This, coupled with the purchase of 3 per cent from Max India, took its holding to 33 per cent. Although officials from the group would not comment, it is expected that this stake may go up to around 38 per cent if its reported negotiations with other minority shareholders materialise. Among other shareholders, the Hinduja group has little over 5 per cent in HEL.

In September last year, HEL announced the acquisition of BPL Mobile Communications Ltd (BPL Mumbai), BPL Mobile Cellular Limited (BPL Cellular) and Essar Spacetel Limited (Essar Spacetel) for a consideration of $ 1.5 billion. The acquisition marked the consolidation of BPL’s mobile services and Essar Spacetel with Hutchison Essar.