So, its finally over. The Foreign Investment Promotion Board (FIPB) has given the green signal to UK-based Vodafone to acquire a 52% stake in Hutch Essar. It agreed that 15% stake controlled by Analjit Singh of Max group (7.58%) Asim Ghosh (4.68%) and IDFC (2.81%)is controlled by Indians. Hence it does not violate the government cap of 74% FDI in telecom.
Of the Essar group's 33% stake in the company, 22% is controlled by companies registered in Mauritius. With Vodafone's 52% stake that adds up to 74%. Now with the FIPB clearly stating that none of the three entities that control the 15% stake can sell their stake to a foreigner without taking the approval of the government. But that cannot happen unless the FDI norms are changed.
That means in case any of them want to exit, it can be bought by the other two. Or they need to find another Indian investor.
With the Essar group already controlling 33%, this is a clear chance for them to consolidate their holding to 48% by buying out all of the three. That definitely is a possibility that Arun Sarin and Vodafone would not want. After all, big comma is well known to have a 100% control on almost all the operations. Knowing the ambitions that the Ruias have and the their current cash flush position, I would not be surprised to see them make an offer to the trio. When? That remains to be seen.
But I am sure, most telecom scribes in Delhi are quite happy that Voda has finally got the FIPB green signal. After all, one cannot keep having three stories a day on the same company from three different correspondents for three months in a row.
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