Ruias to hold 22-38% in merged Hutch

Minimum valuation of Ruias' holding seen around $792 million.

The Ruias will have a minimum of 22 per cent to a maximum of around 38 per cent equity stake in the merged holding company of Hutchison-Essar.

The Ruias have an option to increase their stake by another 6 per cent in the first stage, and then again, by another 10 per cent, depending on how much of the equity of its partners it can eventually buy out.

Apart from Hutch, which will have the majority stake, the other partners include the Hindujas, Kotak Mahindra and Analjit Singh of Max.

The merged entity has been valued differently by investment bankers, but it ranges around $3.6 billion. At 22 per cent, the valuation of the Ruias' share comes to around $792 million.

However, in a different valuation, Hinduja TMT Ltd in a note to the Bombay Stock Exchange said today post-consolidation, Hutch Cellular could be valued at $2 billion.

This puts Hutch Cellular behind Bharti Tele-ventures in terms of valuation, which has a market capitalisation of over $5.5 billion.The third largest player in the country, Idea Cellular, is valued at $660 million.

The company is expected to come up with an initial public offering (IPO) by September-October of around $400 million.

However, the final timing of the IPO will depend on when the company gets the nod from the Foreign Investment Promotion Board (FIPB), where it has applied for clearance for the restructuring of the various companies.

A source close to the deal pointed out, "We are hopeful that we can get the IPO through in September-October, but it will depend primarily on when the FIPB clearances come through."

The Indian companies, that are scheduled to be merged under the new entity, Hutchison Max India, include Hutchison Essar (Delhi), Hutchison Telecom East (which operates the Kolkata circle), Fascel (which covers the Gujarat circle), Aircel Digilink (which owns the licences for Rajasthan and eastern Uttar Pradesh) and Hutchison Essar South, which has licences in West Bengal, Karnataka, Chennai, Andhra Pradesh, besides others.

The merged entity has a subscriber base of over 5.6 million across the country, which constitutes for over 19.65 per cent of the GSM mobile market.

Hutch-Essar, however, trails behind Bharti Tele-ventures, which has a subscriber base of 7.5 million, and Reliance Infocomm, which is in the CDMA space with around 7.6 million subscribers.

The combined entity, however, has a 15.6 per cent share of the total mobile market (which includes CDMA players) and had 35.87 million subscribers in May 2004.

Hutchison made its entry into India through various acquisitions, which included Mumbai (from Max), Kolkata (from the Usha group), and Delhi (from Essar and Fascel, a company in which both HFCL and Hindujas were partners).

The Hutchison IPO is expected to be much bigger than that of Bharti, which was for $186 million.

Cell consolidation

• Hutch IPO of around $400 million expected by September-October.
  
• The merged entity has been valued differently by investment bankers, but it ranges around $3.6 billion.
  
• In a different valuation, Hinduja TMT Ltd said post-consolidation Hutch Cellular could be valued at $2 billion.