Hutch Essar deal - Vodafone clears major hurdle

With Indian finance minister P Chidambaram giving his go-ahead, Vodafone seems to have cleared its last hurdle in acquiring a controlling stake in Hutch Essar. This approval comes within a week of the Foreign Investment Promotion Board giving its nod for the acquisition and should pave the way for Vodafone to secure management control of HEL and for the company to be renamed Vodafone Essar.

As per a leading finanacial daily " As a first step, Vodafone will now be able to constitute a new 12-member board to oversee the operations of the company. Essar vice-chairman Ravi Ruia will be the chairman of Vodafone Essar and Vodafone chairman Arun Sarin will be the vice-chairman. Max India chairman Analjit Singh and HEL MD Asim Ghosh will also be on the board."

The drama
The Vodafone-HEL regulatory saga, which saw the proposal being deferred thrice by FIPB, began in February soon after Vodafone announced it had agreed to acquire companies that controlled 67% in HEL from Hutchison Telecom for $11.1 billion. This had given rise to a controversy about whether the 15% held by Mr Singh, Mr Ghosh and IDFC should be counted as FDI. Besides, RBI and some government officials were reported to have initially opined that the 15% shareholding amounted to violation of FDI and Fema norms. However, the initial adverse views of some government departments were overruled by FIPB last week. This was after the law ministry, in its response to queries raised by the finance ministry, said Mr Singh and Mr Ghosh’s holdings did not amount to ‘benami’ transactions and were wholly Indian. Vodafone had also taken pains to clarify that it had directly acquired 52% in HEL along with options on stakes held by local partners which would give it what it described as ‘economic interests’ over the remaining 15%.

Curtain is yet to be closed...
What remains to be contended is a public interest litigation (PIL) filed by an NGO called Telecom Watchdog, which is pending in the Delhi High Court.