Essar group has right of first refusal

Any move by Hutch to separately sell the Indian business will be legally contested by Essar. Hutch will have to offer its stake to Essar first before turning to others. This is why Hutch is believed to keen on selling its stake in Hutchison Telecom International (HTIL), the NYSE-listed emerging markets of Hutchison Whampoa, where Essar does not have a right of first refusal. An Essar group spokesperson declined to comment on the move. “We would not like to comment ,” an Essar spokesperson said.

According to sources, the Essar group is also looking at diluting its stake by up to 10% in the company. Some PE investors have also shown interest in buying this Essar stake. The cash raised from this transaction could be used by Essar to bid for Hutch’s stake, if and when the need arises, people close to the group said.

Essar has 33.01% share in Hutchison Essar while the rest is held by HTIL. Orascom has a small indirect stake in the company. India is the best-performing geography for HTIL.

During the quarter ended September ‘06, HTIL roped in 3 million subscribers, of which a whopping 2.8 million were from India. The differences among the Essar Group and Hutchison Whampoa have already led to the scrapping of plans to list Hutchison Essar. “When you have disagreements, you don’t go listing,” Hutchison group MD Canning Fok had said earlier.