Vodafone for probing zooming ISL scrip

MUMBAI: UK-based Vodafone has asked the Indian stock exchange regulator to probe the sharp rise in the share price of India Securities, that has risen 11 times since January last year. Vodofone wrote to Sebi on January 18, seeking to stall Essar Group's plan to merge unlisted Essar Telecom Holdings, which holds 11% in Vodafone's Indian arm, with listed group company India Securities.


The contents of the letter were only partly available a couple of days ago and more details emerged on Thursday. Vodafone said the India Securities' shareholders were only partly informed of Essar's option to sell its stake. According to an agreement signed in 2007, Essar can offer its entire 33% in Vodafone Essar, the Indian unit of Vodafone, for $5 billion, but should it tender less than that, the stake would be separately fairly valued by bankers. The vested 11% stake in India Securities cannot be assumed to have one-third of the option value of $5 billion, says the letter.


In response, Essar has said that Vodafone has no legal right to object to the transaction that has been cleared by the courts. "Vodafone is neither a shareholder nor a creditor of India Securities Limited or Essar Telecommunications Holdings and as such has nothing to do with this merger scheme. We have received their communication and are studying it and will respond appropriately," an Essar group spokesman had said.


The letter also points to a discrepancy between the intended use of the funds from the put option and the disclosure made to the stock exchanges as part of the amalgamation of Essar telecom and India Securities. Essar Telecom Holdings has pledged that stake to raise money to invest in coal and mining assets, while the intended use for it in India Securities is telecom and infrastructure. The transaction has been in the works for some time and disclosures had been made to the stock exchanges. But it was not widely known. It came into the limelight after it was cleared by the Madras High Court.