Telecom Watchdog, an NGO that had challenged the shareholding structure of Hutchison Essar Ltd (HEL) two months ago, filed a new petition on Thursday before the Delhi high court. Vodafone Group Plc. just acquired a majority stake in the mobile phone company.
The Delhi-based NGO had first filed a complaint alleging that the foreign investment in the mobile operator had crossed the 74% government limit. But at the time the court said the government agency in charge of clearing Hutch’s shareholding structure was already looking into the issue.
Prashant Bhushan, counsel for the outfit, said the petition, to be taken up by the court on Wednesday, had been filed “irrespective” of the decision by the Foreign Investment Promotion Board (FIPB), the agency that cleared the Vodafone deal a week ago.
“We’re not concerned about what FIPB’s judgement was on this matter. We stick to our position that the stakes represented by the shareholders are proxies for foreign investors and the foreign investment limit has crossed 74% in the company,” said Bhushan.
According to the petition, Hutchison Telecom International Ltd (HTIL) and later, Vodafone, hold rights to buy out the Indian shareholders at the shares’ face value, depriving them of benefits from any possible rise in their value in the future. This, the outfit argues, makes the Indian shareholders into proxy shareholders as the economic benefits will be reaped by the foreign owners.
FIPB deliberated over the issue for nearly two months before clearing the deal after Vodafone submitted an affidavit assuring the government that it will value the 12.26% stakes held by Hutchison Essar managing director Asim Ghosh and Max Group chairman Analjit Singh at $431 million (Rs1,767 crore) if and when it exercised the purchase option over the shares.
HTIL had also assured FIPB it did not intend to exercise the option to reduce the shareholdings of Ghosh and Singh in their holding firms by forcing the firms to issue new shares in its (HTIL’s) name.
On 11 February, Vodafone said it was buying the direct and indirect economic interests held by HTIL in India’s fourth-largest mobile operator, Hutch. The 67% stake purchased included a direct holding of 52% and economic interests, arising from the purchase of call options, of another 15% held by Ghosh, Singh and the finance company, Infrastructure Development Finance Corp. of India. The deal was formally concluded Tuesday.