Bankers free to consider ISL in deciding valuation: Essar

"There is no change in our plans to merge Essar Telecommunications Holding Pvt Ltd with India Securities Ltd (ISL). The investment banks are free to choose whether or not to consider the listed value of ISL in their fair value determination," Essar spokesperson said.

When asked whether the company has appointed the investment banker, the spokesperson declined to comment. Similarly, it could not be ascertained whether Vodafone has given mandate to any banker.

According to sources, both partners are likely to appoint one investment banker each to arrive at the right valuation of Essar's about 33 per cent stake in the JV. Essar had proposed to merge Essar Telecommunications Holdings Private Limited (ETHPL), which has 11 per cent stake in Vodafone-Essar, with India Securities Limited in order to find out Fair Market Value of its stake in the joint venture.

The move was opposed by British Telecom giant Vodafone saying this would distort the valuation of the joint venture. Vodafone-Essar is the third largest telecom operator in India with over 124 million mobile subscribers. Vodafone had bought nearly 67 per cent stake from Hutchison in 2007 while Essar holds the remaining stake.

Vodafone had earlier complained to market regulator Sebi and the Bombay Stock Exchange about Essar's plans to transfer 11 per cent stake to ISL, saying it was not disclosed by the Indian partner.

"Vodafone has written to both BSE and Sebi to express its concerns regarding reverse listing of ETHPL (which owns an indirect 11 per cent in Vodafone-Essar) into India Securities Ltd and has asked for the matter to be examined," Vodafone had said recently.

Essar had hit back saying "The merger scheme between India Securities Ltd and ETHPL is fully compliant with all applicable Indian laws, capital and financial sector regulations."

The Ruias-led group had also alleged that the British firm wants to acquire 100 per cent stake by keeping its valuation artificially low.