January 2, 2005
Waiting for the sun
Then: "It sounds more complex than the shareholding pattern in Reliance," laughs the telecom analyst at a Mumbai-based brokerage. His reference is to the centrepiece of the spat between the Brothers Ambani, the 29 per cent stake in Reliance held by a web of holding companies - the stake that one brother implies he controls. And he is talking about Hutchison Essar, the company whose creation has just been cleared by the ministry of finance. "The company will probably spend the entire analysts' meeting explaining it," he adds.
The facts first: the finance ministry comes into the picture because Hutch is a foreign company (Hutchison Telecom International Limited, or HTIL, promoted by Hong Kongbased tycoon Li Ka-shing) and Indian laws are very particular about how much of a telecom company a foreign corporate can own (the ceiling for foreign direct investment is 49 per cent). The government chooses to turn a blind eye to indirect ownership - for instance, company A can own 49 per cent in telco T directly; the remaining 51 per cent can be held by a joint venture in which Indian company B owns 51 per cent and A owns 49 per cent; thus, the total 'economic' stake of A in T becomes 73.01 per cent - but with HTIL set to own 42 per cent in Hutchison Essar directly, and 14 per cent indirectly, the new structure needed to be cleared by the ministry of finance.
And the bit about the analysts comes into the picture because Hutchison Essar plans to make an initial public offering, or IPO.
Now: In 2007, Vodafone had bought Hutchison India's 67 per cent stake in the Hutchison Essar joint venture for about $11 billion. Currently, Hutchison and Essar are wrangling over Essar's 33 per cent stake in the joint venture.