Vodafone may collaborate with Analjit Singh, founder and chairman, Max India Limited (who holds about 7 per cent stake in Vodafone Essar) to purchase Essar?s 33 per cent stake in Vodafone Essar, according to news reports. If carried through, this move will help Vodafone buy out Essar?s entire stake, while complying with India?s foreign direct investment (FDI) rules for the telecom space.
Vodafone, which holds about 60 per cent stake in Vodafone Essar, has the option to buy Essar?s entire stake by May 2011. However, FDI rules permit the company to hold up to 74 per cent stake in its Indian venture and requires a domestic partner, a corporate or a financial institution, to hold the remaining stake. Thus, Vodafone can, directly and indirectly through its nominee shareholder, Analjit Singh, buy Essar?s entire stake and this can be done without breaching the rules in the telecom sector.
Meanwhile, it is believed that the Essar Group may either look at completely or partially exiting from the joint venture with Vodafone. Essar?s 33 per cent stake carries a pre-determined valuation of $5 billion.
