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Saturday, March 04, 2006

Hutch Essar's Rs 4,000cr IPO in Q2

Hutchison Essar’s much-delayed initial public offer plan is back on the track following the revamp of its shareholding pattern. Pending for over a year, the float is likely to hit the market by the end of the second quarter of this financial year, reports Business Standard.

The size of the float is pegged at 10% of the expanded equity base of the company and will be on the back of an estimated internal valuation between USD 8 billion and USD 10 billion. At 10% float, the size of the equity offering works out to over Rs 4,000 crore (Rs 40 billion), making it the largest domestic telecom equity offering.

A key official said: “We are now compliant with the key requirements of the 74% FDI norms. This has resulted in a more simplified structure (which will allow disclosure). The year-long delay is due to the delay in the issuance of the FDI guidelines, the subsequent clarifications and the time taken to settle the shareholding pattern. We are now back on the track.”

Commenting on Essar’s acquisition of Hindujas’ 5% stake in the JV, company sources said it is in line with Essar’s desire to consolidate and hike its holding to 38%, giving it the status of the single largest shareholder in the enterprise.

“We have progressively enhanced our stake and hope to formalise the Hinduja deal shortly,” they added.

A key element of the reorganisation, which Hutchison Telecom International, HTIL, had announced in Hong Kong on Thursday last, is that the company has established a close strategic partnership with Max India Chairman Analjit Singh as well as Hutch Essar MD Ashim Ghosh’s indirect shareholding, held through an investment in one of the joint venture companies - Telecom Investment India, TII. Another key element is that HTIL now gets to nominate the sixth director in the 11-member Hutch Essar board.

As a consequence of the reorganisation and the Kotak group’s divestiture of its 19.5 equity interest in the JV, TII will own this entire stake in the following manner.

While HTIL will get 7.2% in the JV (via its 37% stake in TII), Singh will get 7.6% (via his 39% stake in TII) and Ghosh 4.7% (24% of TII).

HTIL has rights to increase its stake in the investment company in the future subject to certain conditions.

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