ETHL prepays Rs 4,230 crore raised through NCDs

MUMBAI: Essar group company ETHL Communications Holdings repaid loans worth Rs 4,230 crore ahead of their due date to free the 10.97% stake it holds in the JV with Vodafone Group PLC, the company said on Monday.

The move may be a preamble to a stake sale or some form of price discovery for Essar’s portion of the telecom company. Prepayment of the loan will allow Essar with more options to use the 11% in Vodafone Essar. It may even make the reverse merger process simpler, as Essar would no longer need to get approval from the bond holders.

ETHL Communications had raised the funds in the form of non-convertible debentures on the back of the value of 11% Vodafone Essar stake held in the company. The Essar group holds 33% in Vodafone Essar – India’s third largest telecom operator by subscribers after Bharti Airtel and Reliance Communications.

The Essar group holds 22% offshore while the rest of its Vodafone Essar stake is held domestically in ETHL Communications. Essar had already moved the Madras High Court for an approval to merge ETHL Communications with another listed group company India Securities. This would have given equity investors a backdoor entry to investing in unlisted Vodafone Essar.

Essar has to exercise a pre-agreed option with Vodafone Group to tender its 33% for $5 billion, or a part of the stake at a market determined value before May 2011. Should the market value of Essar’s stake turnout to be higher than $5 billion, the group is expected to tender in only part of its 33% as it will retain similar voting rights even with a smaller stake.