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The Essar Group on Monday said it has pre-paid Rs 4,230 crore raised by subsidiary Essar Communications Holdings Ltd (ECHL) through bonds. The bonds were raised in January 2010, in two series of Rs 2,115 crore each, with maturity dates of July 22, 2011, and December 7, 2011.
After the announcement, the stock of India Securities Ltd jumped the maximum permissible limit of 5 per cent on the Bombay Stock Exchange to close at Rs 65 against the previous day's close of Rs 62.15.
ECHL is a subsidiary of Essar Telecommunications Holdings Private Ltd (ETHPL), which wants to reverse-merge with India Securities. “Upon settlement of these bonds, the 10.97 per cent equity stake in Vodafone Essar Ltd held by ECHL will be free from all encumbrances,” Essar Group said in its Web site. “Now, Essar has decided to foreclose both the bond series with settlement date of March 29 and has deposited the entire outstanding amount in escrow with the account bank for onward payment to bondholders on March 29, 2011,” the company statement said.
Vodafone owns about 67 per cent stake in Vodafone Essar and the rest is with Essar group companies.
According to the shareholders' agreement signed by Vodafone and Essar in 2007, Essar has the option of selling its 33 per cent stake in Vodafone Essar before May 8, 2011. Essar has the option to either sell out entirely to Vodafone for a pre-determined amount of $5 billion or Essar can sell part of its shares to Vodafone in which case the valuation will be based on the fair market price.
The latest move would enable Essar to independently take a decision on the put or part sale option without being influenced by the bondholders.
Vodafone raised concerns over the reverse merger and said the value of India Securities after the reverse merger could be misinterpreted as a fair market value of unlisted Vodafone Essar.
Essar has said that it wants to merge Essar Telecommunications into its listed group company India Securities to discover the true value of its stake in Vodafone Essar.
Vodafone Essar also made a complaint to Madras High Court, where the Essar Group's proposal of amalgamation of ETHPL with India Securities is awaiting approval.
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