document: Vodafone lifts Essar stake by 33 % Vodafone will buy an additional 33 percent stake in its Indian joint venture for $ 5 billion -LRB- R34bn -RRB- after its partner , Essar , exercised an option to sell the holding in India 's third-largest cellular operator . The deal will raise Vodafone 's stake to 75 percent . Essar would exit the company after it implemented a put option over 22 percent of the venture , Vodafone said yesterday , while the British company exercised its call option to buy another 11 percent stake . The deal is a boost for Vodafone chief executive Vittorio Colao as Essar failed to gain a higher valuation for part of its stake in Vodafone Essar . Founded by billionaires Shashi and Ravi Ruia , Essar had an option to sell its entire 33 percent stake for $ 5bn to Vodafone or to sell a smaller stake at an independently appraised fair market value . `` The advantage for Vodafone is that they do n't have to consider the other shareholder now , '' said Macquarie Securities analyst Guy Peddy . Vodafone had already set aside the $ 5bn cash payment within its net debt of # 30bn -LRB- R328bn -RRB- . The deal would increase Vodafone 's direct equity stake in the venture to 75 percent , spokesman Ben Padovan said . The company would comply with local rules , he added . India does not allow foreign companies to own more than 74 percent in local cellular operators . `` They 'll have to sell that 1 percent to some Indian entity , or they 'll have to consider an initial public offering -LRB- IPO -RRB- , '' said MF Global analyst Naveen Kulkarni in Mumbai . Vodafone said the deal was predicted to be completed no later than November this year . Essar spokesmen Manish Kedia and Rabin Ghosh did not respond to calls for comment . Vodafone is increasing its stake in the venture in one of its fastest growing markets . India was one of the `` jewels '' in the three months to December , Colao said in February . While Vodafone is expanding in India , it is seeking to exit from French cellular operator SFR , in which it holds a 44 percent stake . Vivendi , which owns the rest , has said it wanted full control of the unit . Colao , who last year sold Vodafone 's $ 6.5 bn stake in China Mobile in his biggest divestment since he took charge in 2008 , is reviewing all the company 's minority interests amid pressure from shareholders to squeeze more out of the investments . Last year bankers had valued Vodafone Essar at between $ 13bn and $ 18bn when Essar was considering an IPO for the Indian venture , a source said earlier this year . That would have valued Essar 's stake at between $ 4.3 bn and $ 6bn . Vodafone bought 67 percent of Hutchison Essar for $ 10.7 bn in 2007 . Its outlook for India soured a year after its entry , when six new national licences were awarded . Vodafone took a $ 3.3 bn charge for the Indian unit last May , citing `` intense price competition '' . Since then , Vodafone 's service revenue from India increased by 17 percent in the financial third quarter . The Indian cellular market is forecast by Gartner in the US to exceed 993 million users by the end of 2014 . Standard Chartered advised the Essar Group on the transaction , and Vodafone used Goldman Sachs . UBS was hired as a third investment bank to help reach a valuation of the Indian joint venture . -- Bloomberg
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