The Ruias of Essar have informed merchant bankers that they have 'veto powers' to prevent any buyer of Hutchison Whampoa's 67 per cent stake in Hutchison-Essar from using its own brand name.
This opens a new front in the two-month-long battle between Essar and its Hong Kong-based partner Hutchison Whampoa for its stake in India's fourth largest mobile services company.
According to Essar executives, the veto powers are part of the agreement with Hutchison Telecommunications International Ltd, the company through which Hutchison Whampoa holds its stake in Hutchison-Essar.
Essar Vice Chairman Ravi Ruia and Vikas Saraf, CEO of the group's telecom investments, were in London on Wednesday for meetings with Hutchison and bankers.
The veto powers cover transactions with any shareholder or affiliate, approval of annual business and operating plan, signing high-value contracts, entry into new businesses, any mergers and acquisitions or reorganisation and even for raising capital.
Confirming that such veto powers exist, sources close to Hutchison have challenged Essar's interpretation.
They point out that the agreement with HTIL will cease to exist once it is sold, so the veto powers would be "null and void". Analysts close to the negotiations added that as majority shareholders, Hutchison had various overruling rights over several of the veto powers in any case.
An Essar spokesman declined to make a statement and Hutchison Whampoa executives in Hong Kong were unavailable for comment.
