The Hindu Business Line : Hutch to consider bids above $14 b; Essar joins the race

The equation
There are reports that both the Indian suitors (Essar and RCom) have tied up lines of credit in the region of $10 billion each.
Raising funds and structuring such a large deal is going to be a formidable task for the Indian players.

Chennai/Mumbai , Dec. 27

The Essar group is understood to have made an offer to buy out Hong-Kong-based Hutchison group's 67 per cent stake in Hutchison Essar.

The Essar group owns 33 per cent stake in the joint venture. According to sources familiar with the development, the offer was made in Hong Kong earlier this week. They did not disclose the size of the offer.

But, with Hong-Kong-based Hutchison Whampoa indicating that it will only accept bids in excess of $14 billion (over Rs 60,000 crore) for Hutchison Essar Ltd, the likely Indian bidders would have to fortify their fund-raising arsenal further, said analysts.

At this valuation Essar would have to pay more than Rs 40,000 crore for 67 per cent stake. And an existing Indian telecom player such as Reliance Communications, which would have to acquire 100 per cent of Hutch-Essar, would have to pay much more.

RCom is the most prominent Indian suitor in the fray for Hutch-Essar, and, according to sources, has tied up with private equity investors.

The only suitor however, who has gone on record about its intention to acquire into Hutch-Essar, is the UK-based Vodafone.

Raising funds and structuring such a large deal is going to be a formidable task for the Indian players, according to analysts, though there are reports floating in the market that both the Indian suitors have tied up lines of credit in the region of $10 billion each, with some of them getting equity support from private equity players.

"A single group would find this difficult," said top official at an Indian public sector bank. "Of course such a buy cannot be done using pure debt. We have seen how the Tata group companies were placed on `ratings watch' when they announced they might raise debt of less than $7 billion when they decided to buy Corus."

And the groups in question are not like the Tatas, in the sense that they do not have "cash cows in their stable, such as TCS for Tatas," he said. Apart from private equity support, which could be considerable given the size of international private equity companies, Indian groups would also raise their own funds in a manner that could involve exchange of equity of their existing group companies, said the banker.

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