Essar Values Telecom JV At $18 Billion-$20 Billion - Source

MUMBAI -(Dow Jones)- India's Essar Group values its telecom joint venture company Hutchison Essar at between US$18 billion to US$20 billion and will prefer to buy out the stake of its partner, said a source familiar with the situation.

However, a Essar spokesman declined comment on the valuation and its plan if the partner decides to sell a stake in Hutchison Essar.

Hutchison Essar is the country's fourth-largest mobile service provider and is 67%-owned by Hutchison Telecommunications International, or HTIL, and 33%-owned by the Essar Group.

"The Essar Group is of the opinion that the current realistic value of Hutchison Essar should be at $18 billion to $20 billion, and it prefers the option to buy out the company," said the person familiar with the matter.

"The Essar Group will require to borrow about $13 billion to $14 billion for buying out the 67% stake in the joint venture from HTIL," he said.

Essar Group is keen to stay in the telecom space, which is seeing increasing valuations due to the growth potential in India, and as a proof of this, has increased its Hutchison Essar stake to 33% from about 18% some 20 months ago, he added.

"The Essar Group has been talking to bankers and reportedly has a total of about $25 billion committed by some of the banks and financial firms," the person added. He said that Hutchinson Essar is a profit-making company with a lot of potential for growth, and Essar Group would not like to sell out at the current valuation.

-By Raghavendra Upadhyaya; Dow Jones Newswires; 91 22 22884212; raghavendra.upadhyaya@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 3rd January 2007