Essar ups Hutch holding by 5.83%

The Essar Group is undertaking a Rs 2,300-crore ($500 million) re-structuring exercise for its holding in Hutchison Essar, and will up its stake in the telecom operator by 5.83 per cent.

The move comes at a time when the foreign equity level in the company is under the government's scanner on whether the sectoral cap of 74 per cent has been breached.

The Essar Group will acquire the equity held by Infrastructure Development Company (1.95 per cent) and UTI Investment Advisory Services (3.85 per cent) in Hutchison Essar.

This will take the Essar Group's total holding in the company to 33.01 per cent. Hong Kong-based Hutchison continues to be the largest shareholder in the company, with a 42.35 per cent stake.

As a part of the equity restructuring exercise, Mauritius-based Essar Communications Ltd, a fully owned investment vehicle of the Essar Group, will acquire the 10 per cent equity held by Essar Telecom Investments.

Following the two transactions, Essar Communication's holding in Hutchison Essar will be 15.83 per cent.

Besides, Essar Telecom Investments, which is a 100 per cent Indian company, will buy a 10.97 per cent stake in Hutchison Essar from Essar Teleholdings and Vilsat Investments.

This is the second equity restructuring exercise in Hutchison Essar in the last six months. Kotak Mahindra Bank's subsidiaries, associates and promoter group companies in March sold for Rs 1,019 crore an 8.3 per cent stake in the company to Analjit Singh , Hutchison's original joint-venture partner for telecom business in the country.

The company has moved the Foreign Investment Promotion Board (FIPB) for the government's approval.

According to the application filed with the FIPB, the proceeds from the share transfer will be used for repaying some of the existing debts.