ETHPL, ISL merger plan in compliance with regulations: Essar

Essar's statement comes in the wake of its joint venture partner British telecom major Vodafone's letter to market regulator Sebi, asking it to probe the sudden spurt in the share prices of India Securities Ltd (ISL).

"Proposed merger of Essar Teleholdings Pvt Ltd (ETHPL) with India Securities Ltd is in full compliance with all regulations and is being done in an open and transparent manner," an Essar spokesperson said in a statement.

The spat between the two partners -- Essar and Vodafone -- had started with the UK company objecting to Ruias' plan to merge ETHPL, which has 11 per cent stake in Vodafone-Essar, with ISL, saying this may distort the valuation of the JV.

Vodafone-Essar is the third largest telecom service provider with over 124 million subscribers. Vodafone has about 67 per cent stake in the JV, while Essar owms the rest.
Essar has proposed to merge ETHPL with ISL in order to find Fair Market Value of its stake.

"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 had said in a regulatory filing on Wednesday.

Vodafone on Tuesday said that the Essar move could distort the valuation of Vodafone-Essar and had written to Sebi and the Bombay Stock Exchange expressing its concerns and asked for the matter to be examined.

"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.

Essar has contested Vodafone's point about misinformation and said the shareholders of ISL have been "well informed about the merger scheme with all details being adequately disclosed vide Explanatory Statement to the equity shareholders."

It (Essar) also said that the company has two put options -- underwritten put option and fair market value put option-- for divesting its stake in Vodafone-Essar to Vodafone.

The merger of ETHPL with ISL could give a fair market value of Essar's stake in the JV and the Indian firm may use it while exercising its put option, which is valid till May this year as per the agreement between the two partners.