The Hindu Business Line : Hinduja group sells Hutch stake for Rs 2,000 cr

Increasing pie
In the rivalry that is understood to exist between the Hutchison and Essar groups over control of Hutch-Essar, Hutchison has made a gainful move.

Mumbai , June 30

Hutchison Telecom International Ltd is set to increase its control in Indian cellular operator Hutchison-Essar. It agreed on Friday to buy out 5.11 per cent stake in the company from the Hinduja Group for $450 million (around Rs 2,000 crore).

HTIL's effective equity stake in Hutch-Essar will be 67 per cent after this deal, which values Hutch-Essar at close to $9 billion.

The remaining 33 per cent stake is with the Essar Group, which was also within squeaking distance of buying the Hindujas in Hutch-Essar.

In fact, Essar bid the highest — $600 million — among the four contenders, the others being a US-based fund and an entity based in West Asia, said Mr Ashok Hinduja, Executive Chairman, Hinduja TMT, at a news briefing here on Friday.

The deal with the Essar Group at $600 million was nearly clinched, but for various reasons it was called off, as recently as two weeks ago, said Mr Hinduja.

At the Essar offer price, Hutch-Essar's valuation would have been close to $12 billion, he said. Since then, the valuation of the GSM cellular sector had gone down, he added. And his group decided to accept the Hutchison offer.

Under Friday's agreement, Hinduja TMT Ltd (HTMT), with its two wholly owned subsidiaries InNetwork Entertainment Ltd (INEL), Pacific Horizon Ltd (PH) and Hinduja Group's Mauritius-based company Kumbat will sell their entire stake in IndusInd Telecom Network Ltd, an SPV holding 5.11 per cent of the issued share capital of Hutchison Essar Ltd (HEL), to Hutchison Telecommunications (India) Ltd, an indirect wholly owned subsidiary of the Hutchison Telecommunications International Ltd.

Hutch is among the top four wireless telephony operators in the country. IndusInd Investment Bank acted as the sole financial advisor to the deal.

Friday's agreement underscores two points, according to analysts. One, in the rivalry that is understood to exist between the Hutchison and Essar , Hutchison has made a gainful move. Secondly, it indicates how valuations of telecom companies are moving. When HTMT itself bought out Sumitomo Corporation's stake in Hutch-Essar in March this year, it paid $67 million for a stake of around 1.23 per cent. The valuation was between $5.5 billion and $5.7 billion, said Mr Hinduja.

At $450 million, the Hinduja Group's exit from Hutch-Essar is at a gain of four to five times its initial investment, said Mr Yagnesh Sangrajka, Chief Financial Officer, HTMT.

In March again, Telecom Investments India — a joint venture between Analjit Singh of Max India fame and Hutchison bought Kotak Mahindra Bank's 8.33 per cent holding in Hutch-Essar Ltd for Rs 1,019 crore.

This deal valued Hutch-Essar at $6 billion.