The Essar Group has said that Vodafone is attempting to gain 100 per cent control of Vodafone-Essar at an artificially depressed value. In a statement, the Essar Group said that the merger scheme between India Securities Limited (ISL) and Essar Telecommunications Holdings (ETHPL) was fully compliant with all applicable Indian laws, capital and financial sector regulations.
The Essar Group also said that Vodafone?s objections to the merger were motivated and factually incorrect. The purpose behind raising these objections, the statement said, was to prevent the discovery of the fair market value of Vodafone-Essar, as envisaged in the agreements between Vodafone and Essar.
This comes after Vodafone wrote to the Securities and Exchange Board of India (SEBI) requesting a scrutiny of the tenfold rise in ISL?s shares between January 2010 and January 2011.
The operator had also written to both the Bombay Stock Exchange (BSE) and SEBI expressing its concerns regarding the reverse listing of ETHPL (which owns an indirect 11 per cent stake in Vodafone Essar) into India Securities Limited and had requested a thorough scrutiny.
In 2007, Vodafone had acquired nearly 67 per cent stake in the company, while Essar has a little over 33 per cent equity in the joint venture. India Securities Limited (ISL) is a group firm of Essar and is listed on the bourses. Transfer of 11 per cent stake held by to ISL will allow shareholders of ISL to participate in Vodafone Essar.
If carried through, Essar would know the fair (market) value of its 33.02 per cent stake, for which the company has the right to exercise the put option, a contract that gives the seller the right to sell a specified quantity of securities at an agreed price within a specified time period.
