India Securities Ltd (ISL), the Essar group company, today hit back at Vodafone for objecting to the merger plans of another group firm Essar Telecom Holdings Pvt Ltd (ETHPL) with itself, saying that Vodafone has no locus standi to object to the proposal as it is neither a shareholder nor a creditor.
The Essar Group holds about 33 per cent stake in the joint venture with Vodafone. While ETHPL holds 11 per cent, the rest of the stake is held by Essar Telecom Ltd.
“Vodafone has no locus standi to raise such objections to the merger since it is neither a shareholder nor a creditor of both ETHPL and ISL,” ISL said in a filing to the Bombay Stock Exchange.
The ISL shareholders have been well informed about the merger scheme with all details being adequately disclosed vide the explanatory statement to the equity shareholders. Further, they are also aware that Essar Group’s stake in the JV with Vodafone will be transferred to ISL post merger, the statement said.
The company said it has two put options – underwritten put option and fair market value put option – for divesting its stake in Vodafone-Essar to Vodafone.
“On exercise of an underwritten put option, Essar can sell its stake to Vodafone for an agreed value whereas on exercise of the fair market value put option the stake sale will happen at the fair value. Thus, the underwritten put value is the minimum assured value that Essar will receive on sale of the Vodafone stake.”
Vodafone had yesterday objected to the Essar Group move for the merger of ETHPL with listed group firm ISL. Vodafone had said the reverse merger could distort the valuation of the joint venture Vodafone-Essar. It has written to both BSE and SEBI asking them to examine the matter.
“Vodafone is concerned that the value of India Securities Limited could be misinterpreted as a Fair Market Value of Vodafone Essar,” it had said in a statement.
The merger of ETHPL with ISL could give a fair market value of Essar’s stake in the joint venture and the Indian firm may use it while exercising its put option, which is valid till May this year for $5 billion as per the agreement between the two partners.
