INDIA BUSINESS WORLD - APRIL - MAY 2007
The Month that was ...

NGO CHALLENGES VODAFONE IN HC OVER 15% STAKE

NGO Telecom Watchdog has approached the Delhi HC, challenging the Foreign Investment Promotions Board's (FIPB) decision to give a clean chit to the 15% shareholding in Hutchison Essar held by its MD Asim Ghosh, Max India chairman Analjit Singh and IDFC.

Last month, the FIPB cleared the deal and said the controversial 15% stake is considered held by Indians. Following this, earlier this month, finance minister P Chidambaram gave the final go ahead for Vodafone to acquire management control of the HEL.

The NGO had earlier challenged the deal on the grounds that with the purchase of a majority of shares by Vodafone in Hutchison Essar, the foreign direct investment (FDI) in the telecom service provider was at 89.03% way above the prescribed limit of 74%. On March 9, the Delhi HC, apparently convinced of a prima facie case that Hutchison's stake in HEL violated the 74% FDI cap, had asked the FIPB probe the deal.

"We have submitted additional facts before the Delhi HC today. The new details involve the misuse of funds by IDFC. An IDFC company - SMMS Investments Pvt Ltd - had purchased HEL shares, amounting to a total 2.77% at Rs 103.59 per share and executed agreements to sell below par value at Rs 6.23. We have pointed out that this is a benami transaction. The court had given us an option to file a review petition if we were not satisfied with the FIPB's decision," Anil Kumar, secretary of the NGO said.

According to Mr. Kumar, the NGO, in its petition has also pointed out that the disparity in the valuation of the shares held by Mr. Ghosh and Mr. Singh. "In its submission to the FIPB, Hutchison International has said that market value of Mr. Ghosh's and Mr. Singh's 12.26% per stands at $164.51 million and $266.25 million, respectively," he said.

The NGO has also alleged that the FIPB had cleared the deal after British Prime Minister Tony Blair spoke and also wrote to his Indian counterpart Manmohan Singh on the issue. The deal had become one of the most 'controversial' instances of FDI in telecom sector.