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3-year lock-in for VSNL strategic partner

Thomas K Thomas

The shareholders agreement for Videsh Sanchar Nigam Limited has stipulated a three-year lock-in period for the strategic partner during which the latter cannot sell its 25 per cent stake in the company. The earlier drafts of the SHA had proposed a five-year lock-in.

The agreement also states that after the expiry of the three-year lock-in, the government can sell all or part of its stake to the strategic partner at the fair value or original purchase price, whichever is higher. If any shareholder wants to offload his stake, the existing shareholders will have the first right of refusal.

There is also a change in the way the 12-member board would be constituted in the event of a change in the equity pattern. As per the SHA dated November 13, 2001 prepared by Crawford Bayley & Co, both the government and the strategic partner will initially have four directors each with the remaining four being independent members.

However, the strategic partner will have the right to appoint a maximum of six directors on the board in the event of it holding more than 26 per cent of the issued equity.

The government too will be allowed to appoint two more directors in the event of holding more than 25 per cent stake.

The earlier draft of the SHA, dated May 30, 2001 had proposed that both the strategic partner and the government be allowed to appoint four directors each if they held over 25 per cent of the equity.

At least three-fourth of the board will comprise Indian nationals as compared to the earlier proposed 10. In an event of the strategic partner going bankrupt, the government has reserved the right to buy back shares at 75 per cent of the original sale price as opposed to the earlier proposed 50 per cent.

The government is expected to invite financial bids for offloading 26 per cent stake in VSNL on February 1, 2002. The three companies which are in the fray for a pie in the telecom major are Reliance, Tata and Dishnet-Tycom consortium.

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