Hutchison Essar Preps IPO

India's Hutchison Essar is getting its house in order in preparation for an IPO, reorganizing its shareholding structure to a more simplified setup that also ensures it conforms to India’s new foreign investment rules. (See Hutch Reorganizes Essar.)

To clear up its somewhat convoluted ownership of the mobile operator, Hutchison Telecommunications International Ltd. (NYSE: HTX) is restructuring its joint ventures with the Kotak Group so that a single joint-venture company holds a 19.5 percent indirect stake.

HTIL now holds a 42.34 percent direct stake in Hutchinson Essar and 7.28 percent indirectly, while the Essar Group owns a 33 percent direct stake.

The move follows news that Kotak Mahindra Bank has sold its 8.33 percent indirect stake in the company to Telecom Investment India, a holding company owned by Analjit Singh -- the founder of Essar's previous incarnation, Hutchison Max Telecom. (See Kotak Sells Hutch Stake.) The 10.19 billion rupee (US$229.61 million) deal values the operator at around $6 billion.

Hutchison Telecom has been planning to list the operator since last year, but has been waiting for clarification on the Indian government's regulations for foreign investment in the telecom sector, which were adjusted last fall.

If the listing goes ahead, parent company Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY) could potentially have three of its mobile properties trading on public markets by the end of 2006. Despite a recent setback, it still plans to list 3G operator 3 Italia at some point this year and follow up by floating Three UK in the U.K. (See Hutchison Delays 3 Italia IPO and Breakup Talk Swirls Around Tele2.)

In the case of its 3G operations, Whampoa has sunk millions into building out networks across Europe and Asia and is eager to offload them to recoup the investment. For fast-growing 2G markets like India, it wants to plow the cash back into expansion. On that front, Hutchison Essar recently completed the acquisition of BPL Mobile Cellular, which takes its network to 16 of India's 23 license areas. (See Hutch Essar Completes BPL Buy.)

— Nicole Willing, Reporter, Light Reading