Is all well between Hutchison and Essar? That's a question that has been doing the rounds for a couple of weeks now. If the buzz in Mumbai's investment banking circles is anything to go by, things are not hunky-dory between the two partners that make up Hutchison Essar, the mobile telephony joint venture (JV) that operates in 16 circles in India. Hutchison Telecommunication International Ltd (HTIL) directly holds a 42.34 per cent stake in the JV, and 19.5 per cent indirectly. The Ruias of the Essar group control 33.05 per cent, and could be in the hunt for 5.11 per cent more, currently held by the Hindujas. Even if Essar does move up to 38.2 per cent, Hutchison clearly calls the shots, being the largest shareholder on the basis of its direct holding; the indirect holding comfortably takes the Hong Kong telecom firm beyond 51 per cent, ensuring management control.
...Clearly, from the Hutch point of view, an IPO is an imperative, given that HTIL invested huge sums of money (this year, HTIL will invest around Rs 8,100 crore across all its operations globally, out of which about Rs 5,800 crore will be invested in India) last year in its operations across various countries. And as most bankers are quick to state, the IPO should have actually taken place at least a year ago. Essar officials maintain that the issue is not about control and that the IPO plans are on track. Hutch officials, when contacted by BT, declined to comment on any of the issues, but investment bankers point out that an IPO in 2006 from Hutchison-Essar appears unlikely. A source close to both the parties describes the issues as "if there is no unanimity between the shareholders, this IPO is not going to take place tomorrow".
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.