Stakes in Hutchison Essar don’t tally, throw up a 5.8% gap

KOLKATA: The high stakes of Hutchison Essar (HEL) shareholding from its largest Indian shareholder, Essar, has apparently thrown up some conflicting figures. The perceived contradictions are:

The Ruias maintain that Essar holds 33.01% in Hutch-Essar.In HEL’s latest submission to the DoT, the total defined Essar shareholding, through Essar Teleholdings-Vilsat Investments and Essar (Mauritius Investors), is pegged at 27.21%.
Of the 27.21% Essar bloc, 15.76% is held by foreign shareholders.

This, according to top DoT sources, takes the effective foreign shareholding to nearly 58%.This apparent disconnect in Essar’s HEL stake is interesting, as it’s learnt that the DoT and FIPB circles are keen to ensure that “defined Indian shareholdings in telecom service companies do not indirectly pass into foreign hands,” which would not be in the spirit of the 74% telecom FDI norms.

That’s not all. While no precise explanation can be found for the missing 5.8% - between the 33.01% that the Ruias claim they hold in HEL and the 27.21% stated in HEL’s submission to DoT - an identical 5.8% is shown in the statement as being collectively held through UTI Investment Advisory Services (3.85%) and Infrastructure Development Finance (1.95%).

When contacted, DoT sources said, “We are examining the 5.8% held in HEL through UTI Investment Advisory and IDFC, which appear to be Essar shares pledged with financial institutions.” Indications are that the DoT might also examine whether any portion of this 5.8% bloc of shares is held overseas.

Neither Hutch-Essar nor the Essar group is very forthcoming with an explanation. ET had sent both a detailed questionnaire through e-mail on July 22 morning, seeking details of the near 58% indirect foreign holding within the defined 27.21% Essar bloc in HEL. ET had also specifically asked Essar whether the UTI Investment Advisory (3.85%) and IDFC (1.95%) stakes were part of Essar’s overall 33.01% bloc in Hutch-Essar.

In a written response to the queries, Hutchison Essar managing director Asim Ghosh, who is also a minority shareholder in the company, merely said: “Company officials will not comment on this. Whatever submissions had to be made, have been made to the DoT.” The Essar group, too, declined to offer a detailed response to ET’s queries. The group also refused to confirm whether the total 5.8% held through UTI Investment Services and IDFC were actually Essar shares pledged as part of an earlier financing deal.

It is well-known that HEL has four shareholders - Hong Kong’s Hutchison Telecom International (HTIL), Essar, Hindujas and Telecom Investments India & subsidiaries.