Mumbai, Jan. 8: Anil Ambani’s Reliance Communications (R-Com) is expected to get a call either later this week or early next to conduct its due diligence exercise at Hutchison Essar (Hutch Essar).
The bidding for the country’s fourth-largest telecom company has entered a critical endgame even as all players continue to grope for clarity on a number of unresolved issues between Li Ka-shing’s Hutchison Telecom International (HTIL) and the Ruias of Essar, the estranged partners.
A 15-member Vodafone team started its due diligence exercise at Hutch House, situated at Peninsula Corporate Park in Lower Parel, Mumbai, but sources said the UK telecom company has not been granted “de facto exclusivity” in this respect — as some media reports had speculated.
Vodafone Group Plc, which is being assisted by Ernst & Young and law firm Trilegal, should finish its job in four to five days and, after that, Anil Ambani’s bean counters will get the opportunity to pore over Hutchison Essar’s books, sources added. Last month, Ambani had formally announced that R-Com was indeed interested in Hutch Essar.
At the same time, the Ruias, who hold 33 per cent in Hutchison Essar, confirmed they were serious bidders for the company as well. “Of course we are interested. It is our company. Why should we do a due diligence,” Shashi Ruia told reporters in Delhi when asked whether Essar would study the books of the company.
Speculation is rife that Vodafone chief executive Arun Sarin will travel to India on Wednesday — the very day the R-Com board meets to decide on ways to fund its bid for Hutchison Essar.
The Anil Ambani group is still in the process of tying up funds for the proposed acquisition though it has been approached by many banks and private equity funds who have expressed their willingness to provide financial support. The buzz today was that R-Com has obtained a $2-billion credit line from Standard Chartered Bank. This was, however, denied by officials of the foreign bank, which is one of the advisers to the Essar group.
Standard Chartered Bank will also look into the financial structure and financing should the Ruias decide to match an offer made by one of the aspirants for Hutch Essar.
Over the next four days, the Vodafone team will look into key financial parameters that include Hutch Essar’s top-line, its customer base and cash flow figures. When Vodafone representatives visited the HutchEssar office today, managing director Asim Ghosh made a presentation about the financial performance of the company, including the pending merger of BPL Mumbai with Hutch Essar.
Sources said R-Com would be called after Vodafone completes the exercise. “The whole process of due diligence between these two players could end in 10 to 12 days. They could, therefore, place their official bids only after that,” an official said.
Meanwhile, sources close to the Ruias rubbished reports that they are on really dodgy ground because they don't have a shareholders' agreement with HTIL that confers on them a legally enforceable right of first refusal. “There is a shareholders’ agreement in place and all such talk about a term-sheet is being done to spread confusion. The group is also sure that it has a clear and complete first right of refusal,” sources added.
An Essar group official declined to comment on the entire issue.