Ministry wants Essar-Loop Telecom link probed

29 April 2009

The ministry of corporate affairs has asked the telecommunications department to reconsider the grant of licence to Mumbai-based Loop Telecom. The ministry of corporate affairs has told the department of telecommunications that there is an indirect link between Loop - a new telecom licence holder - and the Essar Group.

The ministry says that the Essar Group appears to have used Santa Trading Pvt Ltd for investments in BPL Communications which, in turn, is the main shareholder in Loop Telecom. While the Essar group does not directly owns stake in the firm, indications point to a major stake ownership of the group through subsidiaries, which would be against Indian regulations.

The shareholding pattern of Loop involves Santa Trading owning it, which also owns BPL Mobile Communications and BPL Communications. The Essar Group has a 9.99-per cent stake in Santa Trading. But the main issue is that Santa Trading is owned by Kiran Khaitan, a sister of the Ruia brothers who in turn own the Essar group.

''There were significant links and benefits arising to STPL from the financial transactions, direct and indirect, with the Essar Group,'' said MCA.

As per the MCA, Loop is 24-per cent owned by BPL Communications, 51-per cent by BPL Mobile Communications and 24-per cent by Capital Global, Mauritius. BPL Communications has a 73.99-per cent stake in BPL Mobile Communications while Santa Trading has about 86 per cent stake in BPL Communications.

MCA also said that the Essar group has invested Rs1,592 crore in its unsecured, non-convertible debentures in Santa Trading. ''It would appear that through the funding of STPL by Essar Group, equity has been provided to BPL Communications, which is the 48-per cent owner of Loop Telecom. DoT may examine their policy and regulations for eligibility for grant of letter of Intent (LOI) to Loop Telecom for grant of UAS licence,'' said MCA.