Bridging the gap

Mumbai, April 26: The Hindujas are in talks with several bidders for their 5.11 per cent stake in Hutchison Essar Ltd, the country’s third largest cellular service provider with a subscriber base of over 15 million.

In a notice issued to the Bombay Stock Exchange today, Hinduja TMT Ltd confirmed what has been a hot subject of speculation ever since Orascom Telecom of Egypt picked up a 19.3 per cent stake last December in Hutchison Telecom International (HTIL) and, thereby, a 10 per cent stake in Hutchison Essar. The deal with HTIL also entitles Orascom to a board nominee on Hutchison Essar.

“The company has received offers for purchase (of the Hutch stake) which are under consideration. The board has set up a committee of directors to appraise the offers, negotiate and finalise the deal,” the notice said.

Hinduja TMT holds an effective 5.11 per cent stake in Hutchison Essar through a subsidiary IndusInd Telecom Network Ltd (ITNL).

The Orascom deal with HTIL upset the Ruias of Essar who had no intimation about Orascom’s entry into Hutchison Essar.

HTIL has a direct equity interest of 42.34 per cent in Hutchison Essar through wholly-owned subsidiaries and an indirect stake of 19.54 per cent. Recently, it farmed out a part of this indirect stake ? 12.26 per cent ? to companies owned by Asim Ghosh, managing director of Hutchison Essar, and Analjit Singh. HTIL has the option of buying back the stake given to Ghosh and Singh.

The Ruias claim to be the largest shareholder in Hutchison Essar with a 33 per cent stake.

Sources say Hutchison Whampoa’s effective stake in Hutchison Essar is only 26.5 per cent since their stake in HTIL is down to 49 per cent after the stake sale to Orascom.

It was believed that the Ruias were bidding aggressively for the Hindujas’ 5 per cent stake but it is now clear that there are others in the fray as well. It is not known whether HTIL has also submitted an offer.

Meanwhile, Hinduja TMT Ltd announced today that its board of directors had cleared the demerger of its IT/ITeS undertaking into a new company, while simultaneously merging its media and content subsidiary InNetwork Entertainment Ltd into the residual entity.

Both the companies will be listed on the Bombay Stock Exchange and National Stock Exchange and the current shareholders of the company will be allotted shares of both the companies in proportion to the capital employed in the respective businesses. The appointed date of the demerger will be April 1.

Chairman Ashok P. Hinduja said, “The demerger and related restructuring will unlock immense shareholder value. While the current market cap is about Rs 2,220 crore, the sum of parts valuation is significantly higher, which could get unlocked. It will also go a long way in speeding up inorganic growth opportunities in both technology and media/ telecom companies, apart from aiding the induction of strategic and/or financial partners. Operational efficiencies in both the resultant companies would also increase.”