The UK-based telecom major Vodafone fears that its Indian partner Ruias-owned Essar Group and promoters may further dilute stake in the joint venture company, BPL Mobile Communications, rendering it a shell company.
The fear stem from Vodafone’s earlier accusations that Essar Group had already divested 17.6 per cent stake in the Mumbai-based GSM service provider, a move that was confirmed by Essar group.
Vodafone has alleged that Essar raised around Rs 800 crore through various tranches since October 2007. However, according to Essar group’s own admission it has divested 17.6 per cent stake to Mauritius-based Gypsy Rover, an international institutional fund investing in emerging markets, for around $80 million (Rs. 336 crore).
Responding to a questionnaire BPL Mobile spokesperson said “the group, directly or indirectly, holds less than 10 per cent stake in BPL Mobile with the balance held by other shareholders.
BPL Mobile, in its recent statement, has confirmed the issuance of 17 per cent equity for a total amount of approximately $80 million. As a result, the shareholding of all existing shareholders, including Essar Group, has been diluted proportionately.
As per the recent interim order of the arbitrators on September 5, 2008, the arbitrators have asked BPL Mobile and its shareholders to maintain status quo in BPL Mobile – accordingly no fresh issuance of equity by BPL Mobile and no sale of its existing shares in Loop can be made without the approval of the arbitration tribunal.
Ruias and other promoters own 99.99 per cent stake through various companies in BPL Mobile Communications. They have already toned it down to 82.4 per cent, sources close to development said.
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Now the group is looking at further bringing it down to less than 70 per cent and even lower. This will make BPL Mobile Communications a shell company and diminish its values making its shares “worthless”, Vodafone informed the arbitration panel. Vodafone spokesperson declined to comment on the arguments.
The Essar group and promoter companies including BPL Communications (a company registered in 1932 under Partnership Act), Essar Teleholdings, BPL Communications (a company incorporated under Companies Act 1956) and Capital Global (a Mauritius-registered company) own the now diluted 82.4 per cent stake in BPL Mobile.
The UK-based telecom major has also accused Essar Group of acquiring stake in Loop Telecom (a BPL subsidiary) and diluting 51 per cent stake. Loop Telecom was set up as shippingstop.com, and was later acquired by BPL Mobile Communications.
These were done without Vodafone’s “knowledge or consent” and it also fears Essar Group of selling shares in subsidiaries including Loop Telecom and BPL Mobile Communications, which cause “irreparable harm and injury to Vodafone”.
This gains importance as there were reports of certain foreign players in talks with Loop Telecom to acquire a stake in the company.
''BPL Mobile held 51 per cent stake in Loop Telecom at the time Loop obtained 21 telecom licences. The same shareholding continues till date,’’ the BPL Mobile's response said.
''As part of the ongoing arbitration several arguments have been made by counsels of the parties, both for and against, and since the matter is subjudice we would not like to comment on the specific issues, ’’ it added.