labels: essar group, hutchison essar, rbi
RBI''s stand on Essar share pledge rejected by government news
08 June 2007

New Delhi: The finance ministry has held that Essar Communications (India) Ltd (ECIL) cannot be prevented from monetising its stake holding in Hutchison Essar turning down the Reserve Bank of India''s recommendation of 21 May that rejected Essar''s application to pledge shares in ECIL, a non-resident company that indirectly holds nearly 16 per cent in mobile service provider Hutchison-Essar, for an overseas loan to fund its expansion plans.

The department of economic affairs (DEA) is also advising the central bank to take action on the basis of its rules without being "extra cautious".

ECIL has drawn on credit facility from Standard Chartered Bank, London, and had sought the RBI''s approval to pledge its current and future equity shareholding in another Hutchison-Essar holding company, ETIL, in favour of the bank.

Sources with knowledge of the transaction said it was undertaken in parts, and added that the entire transaction was closed on 1 June. Essar is yet to hear from the RBI, they added.

The investor lobby feels Vodafone is undervalued as it has an inefficient capital structure. Its most valuable asset is a passive, minority share and its balance sheet is under-geared.

If the resolution to put this right is implemented, it could release between 17-38 billion pounds of value to shareholders, Glenn Cooper, chairman, ECS said.

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RBI''s stand on Essar share pledge rejected by government