Vodafone objects to Essar''s reverse listing of holding co

New Delhi, Jan 18 (PTI) Vodafone has objected to Essar''splans to merge the holding firm ETHPL, having 11 per centstake in Vodafone-Essar, with India Securities Limited, alisted firm of Essar Group, saying this could distort thevaluation of the joint venture.

Essar, which has 33.02 per cent stake in India''s thirdlargest operator Vodafone-Essar, has dismissed it saying"Vodafone is neither a shareholder nor a creditor of IndiaSecurities limited or Essar Telecommunications Holding Pvt Ltd(ETHPL) and as such have nothing to do with this mergerscheme".

But Vodafone has written to both market regulator Sebiand the Bombay Stock Exchange to express its concerns and hasasked for the matter to be examined.

"Vodafone is concerned that the value of IndiaSecurities Limited could be misinterpreted as a Fair MarketValue of Vodafone Essar," it said in a statement.

"We have received their communication and are studyingit and will respond appropriately," Essar spokesperson said.

Vodafone-Essar is the third largest mobile operator inIndia. Vodafone had aquired nearly 67 per cent stake in 2007from Hutchison while Ruias-led Essar have little over 33 percent equity in the joint venture.

India Securities Ltd (ISL) is a group firm of Essar andis listed on the bourses. Transfer of 11 per cent stake heldby Essar Telecommunications Holdings to ISL would allowshareholders of ISL to participate in Vodafone-Essar.

This will be a case of reverse listing of Essar ETHPLafter its merger with ISL which is already listed on bourses.

Essar may be doing so to get to know the fair (market)value of its 33.02 per cent stake, for which the company hasthe right to exercise the Put Option, a contract that givesthe seller the right to sell a specified quantity ofsecurities at an agreed price within a specified time period.

According to the foreign partner, "There has been nodisclosure to the shareholders of ISL on Vodafone Essar, whichwould become a substantial asset of ISL. Therefore, theinvestors in ISL have no basis on which to form a valuationjudgement."

It (Vodafone) also said that Essar Telecommunications''swholly-owned subsidiary has stated in its InformationMemorandum of September 2009 and January 2010 that it woulduse the proceeds from the bonds secured against Essar''s PutOption to invest internationally in sector like coal, steeland refining.

"Vodafone does not wish a company in which it holds amajority interest to become the subject of a false market," itsaid in the statement.