Hutch-Essar shareholding under govt lens

Key central ministries "" finance, commerce and telecom "" and the Reserve Bank of India (RBI) have begun a concerted attempt to unravel the complex shareholding pattern in Hutchison-Essar, India's fourth largest mobile phone operator.

The enquiries focus on the 15 per cent shareholding controlled by Managing Director Asim Ghosh and Max India Chief Analjit Singh.

These developments take place roughly a month after Hutchison Telecom International Ltd (HTIL) agreed to sell its 67 per cent controlling interest in Hutchison Essar to Vodafone, the world's largest telecom company, for an enterprise value of $18.8 billion.

Under the existing shareholding structure, HTIL holds 52 per cent in the company and the Essar group holds 33 per cent. Nearly 15 per cent is held by Ghosh and Singh, HTIL's partners, giving it a 67 per cent controlling interest. The shareholding is proposed to change after the Vodafone-HTIL deal is complete.

On February 28, the finance ministry asked the RBI to "urgently" comment on alleged violations of Foreign Exchange Management Act (FEMA) provisions by way of Singh and Ghosh's 15 per cent holding in the mobile phone company.

The ministry also advised the RBI to examine the nature of control of this shareholding on the basis of the declaration made by HTIL and Vodafone Plc to the United States Securities & Exchange Commission. Those documents are available on the Securities and Exchange Commission (SEC) website.

The finance ministry has also asked the department of telecom to examine Ghosh and Singh's shareholding in Hutchison Essar in light of telecom licensing guidelines.

Simultaneously, another missive was sent to Hutchison Essar, asking the Mumbai-registered company to urgently furnish a series of documents to the Foreign Investment Promotion Board (FIPB).

These documents include the complete details on the direct and indirect foreign holdings in the company and the details of beneficial ownership through overseas entities.

The ministry also sought details on the exact nature of the beneficial ownership of stakes held in Hutchison Essar by entities controlled by Ghosh and Singh.

These are: Indusind Telecom Network Pvt Ltd and Telecom Investments India Pvt Ltd together with subsidiaries "" Jay Kay Finholdings (India) Pvt Ltd and Usha Martin Telematics Ltd. These entities are HTIL's partners, according to regulatory disclosures by Vodafone recently and HTIL in the past.

Besides this, Bharti Airtel has been asked to make a disclosure on Vodafone Plc's shareholding in the company, as well as its shareholding pattern on February 28.