Ruias in talks with Voda over put option

NEW DELHI: Amidst all the tough posturing by Essar, the Ruais are quietly engaged in intense negotiations with Vodafone over the time frame and pricing of the “put’’ option for Essar. While Essar wants a premium to the price paid to Hutchison International, in line with the valuation of the company when it decides to exercise this option, Vodafone is insisting that it be at the same price, sources in the know told ET.

Sources also added that negotiations were slated to continue over the course of this week, with both companies trying to thrash out the terms and conditions of the ‘put’ option, in the first step towards putting in place a new shareholder agreement.

Other contentious issues between the JV partners include the Ruias’ demands for joint management rights and also that they have the right of first refusal for any stake sale in the future.

Even as Essar has repeatedly reiterated its intention of staying in the telecoms joint venture company, the fact that it wants a put option in place in the new shareholders’ agreement is an indicator that it is keeping its option open on exiting the company at a later date, sources added.

Sources said if Vodafone did not agree to its demands, Essar, in addition to the legal option, was also exploring possibilities such as vetoing Vodafone’s capital expenditure plans for the company and rejecting the MoU it had signed with Bharti Airtel for infrastructure sharing.

However, both companies refused to comment on these developments. Essar, in its reply to a detailed questionnaire from ET said it “would not like to comment on these issues”. Vodafone, on the other hand, did not reply to the questionnaire.

Meanwhile sources said that Vodafone has sought the Foreign Investment Promotion Board’s (FIPB) approval for acquiring a controlling stake in Hutch-Essar. While Vodafone does not need this clearance for buying-out the Hutchison International’s 52% stake, Indian guidelines stipulate that as per Press Note 1, the UK-major obtain the FIPB approval for its exit from Bharti by furnishing a No Objection Certificate (NOC) from the latter.

Sources also added that FIPB approval was only a formality as Vodafone had already submitted its board resolution and the NOC from Bharti. They also added that the Bharti NOC to Vodafone had a cut off date of September 2007, with a clause that it could be extended to December 31, of the same year. This implies, the NOC will be valid only if the HTIL and Vodafone finish the transaction before December 31,2007. When contacted on the cut off date, the Bharti spokesperson told ET: “