Essar stake to see external valuation

Price of put option to be assessed for future sale.

Vodafone and the Essar group have agreed to appoint independent valuation experts to determine the price of the put option under which Essar can sell its 33 per cent stake in Hutchison-Essar, India's fourth-largest mobile service provider.

The put option, which ensures the Essar group a premium, will come into effect within three to four years of the agreement. The group also has the choice of not invoking the option and continuing as a partner.

The two parties have also agreed to a comprehensive right of first refusal (ROFR) that applies to both partners, should either decide to sell out.

Under the earlier shareholders' agreement with Hutchison Telecom International Ltd (HTIL), which agreed to sell its 52 per cent stake to Vodafone early February, the Ruias had only a limited ROFR.

This was applicable only if HTIL sold its stake to Reliance, Bharti Airtel or the Tatas. The Ruias sought to invoke this clause, which had become a contentious issue in the sale of HTIL's stake to Vodafone.

These clauses are a part of the shareholders' agreement that is expected to be signed in a week between Essar and Vodafone. Vikash Saraf, CEO of Essar's telecom investments, is in London working out the details. Vodafone CEO Arun Sarin is expected to arrive in India to sign the agreement.

The two sides have also agreed on a 12-member board for the company in which four members would be appointed by the Ruias, the family that owns Essar.

No final decision has been taken yet, but it is suggested that Ravi Ruia could become chairman and Sarin vice-chairman, to conform to the regulatory stipulation that an Indian must head the board.

The agreement does not include BPL "� the mobile company bought over by the Ruias last year. BPL was supposed to have been merged with Hutchison-Essar, but the plan stumbled on legal hurdles. The issue of the future of BPL and a possible increase in the Ruia's equity in Hutch-Essar are to be negotiated later.

When contacted, the official spokesperson for Hutch-Essar said, "We are holding discussions with Vodafone and would not like to comment on it at the moment."

Ravi Ruia and Prashant Ruia met the finance secretary alongwith senior Vodafone executives on Monday.