Analjit Singh buys Kotak out of Hutchison Essar

Essar in talks with another minority shareholder - Hindujas - for buying their 5% stake.

Kotak Mahindra Bank's subsidiaries, associates and promoter group companies today sold 8.3 per cent stake in Hutchison Essar for Rs 1,019 crore to Analjit Singh, Hutchison's original joint venture partner for telecom business in the country. The original investment made by the Kotak Mahindra group in 1998 was around Rs 2 crore.

In a press release, the Kotak Mahindra group said, "The sale consideration is on the basis of an underlying value of about $6 billion for Hutchison Essar, adjusted for debt and preference share liabilities in the companies which hold shares of Hutchison Essar."

Hutchison Essar is a joint venture between Hutchison Telecommunications International and the Essar group.

Kotak Mahindra Bank's consolidated share of the pre-tax profit on the sale is Rs 392 crore for its 3.19 per cent share in Hutchison Essar.

"We were one of the early investors in the Indian telecom sector and take immense pride in the development of Hutchison Essar as one of the leading telecom companies in India. We have enjoyed a very fruitful association with Hutchison and Hutchison Essar," said Uday Kotak, executive vice-chairman of Kotak Mahindra Bank.

Industry sources said Hutchison Essar's valuation was less than half of Bharti Airtel's' valuation of $15.4 billion. Bharti Airtel is India's biggest private sector cellular operator in which Singapore Telecommunications holds 30.8 per cent.

Hutchison has recently undergone changes in promoters' holdings. Last year, Hutchison Essar agreed to pay $1.16 billion to buy two companies run by the BPL group, expanding its presence.

The Essar group is the largest shareholder in Hutchison Essar with 33 per cent stake, followed by Hutchison's 26.5 per cent stake. Orascom holds 10 per cent while the Hinduja family holds 5 per cent. Following today's deal, Singh will hold 8.33 per cent. The remaining shareholding is with a handful of investors.

The Essar group has been consolidating its position in the telecom space.

The process had begun in June last year when the group agreed to buy Rajiv Chandrasekhar's 64 per cent in BPL Communications.

In August last year, Hutchison said it was exploring ways to acquire two units of BPL Communications with Essar. The group later acquired TPG Nambiar's 13 per cent stake to scale up its holding to 77 per cent.

A fortnight later, the Essar group agreed to sell two BPL firms and Essar Spacetel to Hutchison Essar. Finally, in November last year, the group bought 3.16 per cent from Max Telecom Ventures for Rs 657 crore.

The Kotak Mahindra stock went up 3.63 per cent in a firm Mumbai market today. The stock closed at Rs 237.10 on the Bombay Stock Exchange, 3.63 per cent higher than yesterday's close of Rs 228.80.

Meanwhile, Essar sources said the group was on the verge of settling negotiations with another minority stakeholder "" the Hindujas - to purchase its 5 per cent stake in the joint venture. This, the sources added, would take the Essar group's shareholding in the joint venture to over 38 per cent.