Hutch moving away from Anil’s grasp

Satish John & Nivedita Mookerji

MUMBAI/NEW DELHI: Even as Vodafone CEO Arun Sarin packed his bags for London on Thursday night after doing the rounds in Delhi’s corridors of power, his main rival for Hutchison Essar followed in his footsteps. Anil Ambani of Reliance Communications (RCom) met the finance minister and the communications minister in an apparent effort to keep his bid hopes alive at a time when the momentum seems to be shifting towards Vodafone. The Ruias, with 33% in Hutchison Essar, continue to hold the high cards, as any winning bidder will have to contend with them.

Advantage Vodafone

Arun Sarin’s efforts to start checking on regulatory issues in India show that talks with LI Ka-shing to buy out the latter’s 67% stake in Hutchison Essar are going smoothly. The buyout could initially target 52% of Hutch Essar, since current FDI regulations allow only a 74% foreign stake, including stakes held by Indians abroad. The Ruias are said to hold 22% through a Mauritius company. If Hutchison wants to sell the balance 15%, it will need to sell them to an Indian partner, and the Ruias are the obvious choice. This explains Sarin’s friendly overtures to the Ruias, who are still coy about acknowledging it.

Ruias move centrestage

As the race narrows to two key bidders in the final stretch, the Ruias are sitting pretty with their 33% stake. They can either sell out at the same price as Hutchison, or even seek a higher price to play ball. Vodafone currently needs them more than they need Vodafone, due to the FDI limit. Bankers reckon that they are also the best placed to buy the company if Li Ka-shing is willing to sell it to them. They are the most bankable since they can offer the best collateral: the 67% to be bought, plus the 33% of Hutchison Essar that they already own. Together they can pledge 100% of the company to buy 67% of it.

Anil may be slipping

While Anil Ambani is reckoned to be the player with the most to gain from a Hutchison purchase, he is also the one with the least support from the Ruias. Since competing companies cannot own more than 10% in rival operators in the same circle, Ambani will have to opt for a complete merger at some point. But this means he will have to get the nod from Essar. While the Ruias and Ambanis are not the best of friends, insiders say the Ruias are less opposed to Anil than Mukesh Ambani. But they could demand a huge price for their handshake.