Reality Check India

Chennai based company sells stake to Etisalat for 380 Crores

Posted in Uncategorized by realitycheck on January 22, 2010

The big telecom news last week was Etisalat approaching the FIPB (Foreign Investment Promotion Bureau) to assume full control of their Indian arm, Etisalat DB (formerly Swan Telecom).

They also recently acquired a stake from a venture capital firm.

Last month, media reports said Etisalat had bought an additional 5.27 per cent stake in its Indian subsidiary for 3.8bn rupees (Dh305 million) from Genex Exim Venture, an investment firm based in Chennai.

Source : National (Abu Dhabi)

How many have heard of this company ?  How many companies without even a website sell their stake for Rs 380 Cr.  This single deal is worth more than half of funds raised by all Private Equity (PE) firms combined* in 2009. Surely a monumental achievement. Yet no one talks about it.

So  how does the media in Abu Dhabi sees the original deal ? To refresh your memory : the original deal refers to the loss incurred to the Indian government due to the role played by the middlemen.

Etisalat originally bought its 45 per cent stake in the former Swan Telecom from the Dynamix Balwas Group in December 2008 for US$900 million (Dh3.3 billion), which included a premium to control the company’s management. Etisalat’s stake values the Indian subsidiary at $1.53bn.

Source : National (Abu Dhabi)

Etisalat seems to have paid a premium to control the company’s management.  This was not reported in the media and is counter to what the former FM said. (See previous posts). It might be safe to assume that Telenor also paid a premium to the spectrum winners for control.

The startling thing about the scam is that nobody questions the fact that the government and the people of India lost and lost big.

Recently the CBI seems to be going after Mr A Raja, the minister who is in charge.  There have been major raids this week.

The CBI’s sudden turn to Raja’s family-run companies in connection with the investigation on spectrum scandal is going to be a huge embarrassment to the UPA Government in the coming days.

According to sources, the CBI sleuths had got evidence of huge money transaction from abroad to real estate companies like Green House Promoters and Equaas Estates. The money flowed from Singapore, Malaysia and Dubai into these companies during the same period in 2008 when the controversial allocation of 2G spectrum took place.

Source : The Pioneer

Aside : Outstanding and courageous journalism by Mr Gopikrishnan and the Pioneer.  All other media houses are avoiding this story at the same time as if on cue.

Mr Raja has repeatedly claimed that he had the backing of the Prime Minister and the former Finance Minister. He says they have been updated on every move. The Prime Minister even unusually attempted a defence from Bangkok. In public office, personal integrity does not just stop at not accepting cash. It includes not allowing others to get away with it either. This is going to be a litmus test for the PM and the former FM.

Back in the early 90’s, the media would jump on every story of corruption. That in  no small measure was responsible for toppling the Congress party’s monopoly. You would think that will all the liberalization, the media would go hammer and tongs on this one. Well its not happening and that tells you a lot about how liberalized the media really is.

Another scandal the media isn’t touching

The case, popularly known as Motorola scandal, dates back to 2003 when the CBI had recovered Rs 50 lakh in a raid on a middleman on September 25 that year. According to the FIR, MTNL paid Rs 7.18 crore to Motorola for purchase of equipment, and made illegal gratification to MTNL officials through one Rajiv Gupta, a middleman.

The Pioneer

* Source : India PE Blog

Pegs total PE mobilization in 2009 at Rs 792 Crores.


4 Responses

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  1. Barbarindian said, on January 23, 2010 at 6:40 pm

    The key concept here is public-private partnership, i.e. public money for private profits for public officials.

    You will notice that the most enthusiastic supporters for “capitalism”, “free market” etc. are middle class professional worker types, who can not even run a neighborhood kiosk and gladly slave away for corporations for the rest of their lives. These are the people who equate “capitalism” with “corporations”.

    Meanwhile, actual corporate people swear by socialism, heck, they even come up with things like “Bombay Plan”. Cue the recent lip pouting by L&T head honcho Naik, demanding protection from Chinese competition.

  2. […] Links :  Chennai based company sells stake to Etisalat DB for 380 Crores (yet does not win any entrepreneurship awards from Roy or Sardesai) Possibly related posts: […]

  3. seadog4227 said, on May 12, 2010 at 9:16 am

    Anywhere else, or given different circumstances here itself, the amount of information could have easily toppled this government.
    Ideally, this govt should be voted out of power and kept in hibernation for 20 years.

  4. Mohamed Hussain said, on April 9, 2011 at 1:16 pm

    i am mohamed hussain from tamilnadu ramanathapuram dist
    i am willing to tak my distric in ramanathapuram distributor for ETISALAT COMMUNICATION SO PLEAS FURTHER MOVEMENT GIVE US PLEAS

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