Ruias promoted Essar group on Wednesday hit back at Vodafone Group saying the latter has no ?locus standi? to raise objections to the merger of Essar Telecommunications Holdings (ETHPL) with India Securities (ISL), since Vodafone is neither a shareholder nor a creditor of ETHPL and ISL.
Essar Group has proposed to merge ETHPL, which has 11% stake in the joint venture Vodafone-Essar, with the listed ISL in order to find fair market value for its stake.
Vodafone on Tuesday had said the Essar move could distort the valuation of the joint venture (Vodafone-Essar) and had written to the market regulator Sebi and the Bombay Stock Exchange (BSE) expressing its concerns and asked for the matter to be examined. Shares of ISL declined 5% on the BSE on Wednesday to close at Rs 68.85.
?The shareholders have been well informed about the merger scheme with all details being adequately disclosed. Also, the scheme clearly mentions the fact that the merger would result in ISL becoming a stakeholder in a leading telecom company in India in which Essar Group holds stake,? said Essar Group in a filing to the BSE.
The Essar group has two put options viz., underwritten option and fair market value put option, for divesting its stake in Vodafone Essar. On the exercise of underwritten put option, Essar can sell its stake to Vodafone for an agreed value (entire 33% for $5 billion) whereas on exercise of 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 Vodafone stake.
Clarifying on its investment plans, Essar said post merger ISL would have the right to decide whether it intends to carry on the business proposed to be carried out by its wholly owned subsidiary. Vodafone on Tuesday had also raised questions on liquidity in ISL and said that it is a highly illiquid vehicle and post-merger, over 95% of the shares will be under the control of the Essar Group and two other shareholders. Accordingly, small amounts of buying or selling could distort ISL?s share price.
To this, Essar replied saying ISL can not be regarded as an infrequently traded company. Accordingly, the contention of Vodafone that ISL is factually incorrect.