Hutchison revamps its Indian unit ahead of listing
Hutchison Telecommunications International (HTIL) has simplified the shareholding structure of its Indian mobile arm, Hutchison Essar, and gained an extra seat on its board in preparation for the unit's listing this year.
After a complex transaction that valued Essar at US$6 billion, HTIL's direct and indirect interest in the Indian company will be reduced from 53.1 per cent to 49.62 per cent.
'The simplified structure is an important step to prepare for a potential listing of Hutchison Essar and conforms to India's new regulation on [foreign direct investment] in mobile telecom operators in India,' HTIL said in a statement yesterday.
As part of the deal, one of HTIL's partners in Essar, Indian financial giant Kotak Mahindra Group, sold its entire 8.33 per cent stake in Essar for 10.19 billion rupees ($1.78 billion) to Analjit Singh, former chairman of HTIL's Indian unit, and another company called Telecom Investments India (TII).
TII - controlled by HTIL, Mr Singh and Hutchison Essar's current managing director, Asim Ghosh - would then consolidate the interests held by other minority shareholders, giving it a combined 19.54 per cent stake in Hutchison Essar.
After the deal, HTIL will own 37 per cent in TII and has an option to buy the rest of TII from Mr Singh and Mr Ghosh in future.
Shares of HTIL closed up 8.55 per cent at $12.70 in Hong Kong yesterday, as investors welcomed the imminent listing of its Indian telecommunications assets.
Hutchison, which has been planning an IPO for its Indian unit since last year, is clearing regulatory issues with the government concerning how much a foreign entity can own in an Indian carrier. The government now allows foreign firms to own up to 74 per cent of an Indian carrier, from 49 per cent previously.
The Kotak transaction also sees the return to HTIL of Mr Singh, the founder and former chairman of Hutchison Max which has been renamed Hutchison Essar.
'I am delighted that Analjit Singh as the original founder has once again decided to invest in the company at such an exciting stage of development for Hutchison Essar,' said Hutchison Telecom chairman Canning Fok Kin-ning.
Earlier this week, Mr Fok said Hutchison Essar was likely to be listed on the Mumbai stock exchange this year.
HTIL has also increased its say in Hutchison Essar's board as it can now nominate up to six of its 11 directors, from five previously.
In a recent report, ABN Amro analyst Suresh Mahadevan said he expected HTIL to continue consolidating its stake in Hutchison Essar even after the unit's listing as the IPO would dilute its interest in Essar. He has a 'buy' on the stock.