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Hong Kong billionaire Li Ka-shing's Hutchison Telecom, in India since 1992, decided in 2000 to partner with Essar Group's Shashi and Ravi Ruia, ambitious brothers who had turned a small family construction business into a conglomerate with interests in shipping, steel, oil and gas.
Shrewdly betting on telecom, they got in early after the sector opened to private companies in the 1990s. But when Li came calling, the Ruias were down on their luck. Badly overstretched, their Essar Steel had earned a dubious distinction as the first Indian company to default on an international debt; it had failed to repay floating-rate notes of $250 million.
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The Ruias were glad to let Hutchison run the show at their telecom joint venture, Hutchison Essar, in which they had a 33 per cent stake, so they could focus on their other businesses. But only to a point. They got mad when Li sold a minority stake in Hutchison Telecom, the 67 per cent shareholder in Hutchison Essar, to Egyptian telecom company Orascom (controlled by Egyptian billionaire Naguib Sawiris). The Ruias saw this as Orascom's backdoor entry. "In a six-year marriage there are bound to be some arguments," admits Shashi Ruia's son, Prashant, who sits on Hutchison Essar's board.
Then in December Li decided to cash out of Hutchison Essar, kicking off a bidding war. The Ruia brothers, insisting they had the first right to buy Hutchison Telecom's stake--a claim it disputes--were pitted against much better known foes, Vodafone and Reliance Communications, which is controlled by Indian billionaire Anil Ambani.
The Ruias lost but also won. In February Vodafone clinched the deal, India's biggest corporate takeover ever. It valued Hutchison Essar, India's third-biggest mobile operator, at $19 billion. The brothers' combined fortune is now $8 billion, up from $2.8 billion a year ago.
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Essar, which derives its name from the brothers' first initials, is hoping for a bigger payoff. Turning down Vodafone's offer to buy their stake, the Ruias are close to signing a shareholders' agreement with their new partner. Meantime, worrying that the Ruias may try to block the sale, Hutchison Telecom has filed caveats in the Indian courts.
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Expect to hear more about these shrewd but superstitious brothers (they consider 13 to be their lucky number and won't fly together). Essar commissioned its first oil refinery in November and is quickly expanding its other businesses. In the past two years the Ruias have increased their holdings in their three listed companies. They then plan to consolidate their empire into the Cayman Islands-registered Essar Global.
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