Shashi Ruia	S.P. Hinduja	Asim Ghosh

Rarely has a 5.11 per cent holding been of such import and caused so much heartburn. Then again, Hutchison Essar isn't any common company. It's a full-blooded telecom play used by 16.6 million subscribers in 16 circles nationwide, and has one of the highest EBITDA margins in the industry (just over 47 per cent). It's got the Hong Kong-headquartered Hutchison Telecom International Ltd (HTIL) as one partner, with a 61.84 per cent stake (directly and indirectly), and the Ruias of the Essar group as a secondary partner with a 33.05 per cent holding. Over recent months HTIL has been keen to take advantage of peaking valuations by taking the joint venture public on the Indian markets, but Essar, it appears, isn't exactly in a hurry to do so.

Against this backdrop, the 5 .11 per cent stake in question, owned by the Hinduja group, assumes significance. The Hindujas are open to selling their stake-at a price but naturally-and both HTIL and Essar are eager to get hold of it. For Hutch it would mean a step closer to the maximum permissible foreign investment limit of 74 per cent. The Ruias would prefer that doesn't happen, and one way of ensuring that is to beat HTIL in the race for the 5.11 per cent. In such a scenario, the party holding all the cards is the Hinduja group, what with both major partners apparently falling over each other to purchase its stake.

Just as investment bankers were reconciling themselves to the Hindujas selling to the Ruias-the deal has been talked about for some time now-last fortnight reports appeared that HTIL has agreed to buy out the Hindujas' holding for $450 million (Rs 2,025 crore), placing the valuation of Hutchison Essar at a hefty $8.8 billion (close to Rs 40,000 crore), almost double last October's figure when the Ruias bought out Max Telecom in the JV (see Heady Valuations, Added Complexities). "It is no secret that the Hindujas are looking to cash out. Since there are only two buyers, it is obvious that the price will go up," says a source close to the development. None of the parties involved-Hutch, Essar and the Hindujas-was willing to comment when contacted by BT.

The Hindujas have stumbled upon this goldmine via its presence in Hutch's Gujarat cellular circle where it used to operate under the "Fascel" brand name. That Chairman S.P. Hinduja can afford to call the shots today is also courtesy the fracas between Hutch and Essar over Egyptian operator Orascom's purchase of a stake in HTIL. The Ruias have written to the department of telecom, seeking clarity on the issue of indirect stakeholders (which is what Orascom is now in the Indian JV). The buzz in banking circles is that Hutch has offered a price that's higher than that of the Ruias. Whether that's true or not only time will tell. What's safe to conclude, though, is that the much-touted initial public offering of Hutch's Indian operations will roast on the backburner for some more time to come.