Further glitch in Vodafone Hutch deal arises

YET ANOTHER glitch in Vodafone's attempts to take control of India's Hutch from Hutchison Essar has emerged. This time it's over the value of a 12.26 per cent stake.

As previously reported this chunk of Hutchison International (HTIL) is held by two Indian nationals: - Asim Ghosh and Analjit Singh. The drawback is that they were supposed to sell it back on favourable terms.

Consequently, Vodafone was expecting to pay around $430 million for the stake. However, Vodafone may have fallen foul of an Indian law which prevents overseas firms from trying to 'pre-determine' how much they are going to pay to buy out local partners.

According to the FT, the Indian law ministry has reminded the FIPB (Foreign Investment Promotion Board) that the stake should not be purchased for "less than a fair valuation."

What Vodafone is expected to argue is that the Indian firms it needs to buy out aren't worth that much because they are virtually only holding companies.

That could, of course, get it into even more deep water since Vodafone needs to pretend that at least 26 per cent of Hutch is held by Indian companies.

The Indian government's dilemma is that it wouldn't want to see such a massive potential foreign investment just evaporate before its eyes whilst simultaneously proving that overseas firms can't walk rough shod over Indian regulations.

Vodafone has already passed a deadline (April 23rd) by which time it should have persuaded the FIPB to let the deal go ahead.

See also Vodafone yet to win over Indian regulator. µ