UK-based Vodafone  acquired 33 per cent stake of its Indian partner Essar in the joint venture Vodafone Essar for $5 billion and may go for a new ally or opt for public offering to remain FDI compliant.

"Currently we (Vodafone) are having 42 per cent stake in Vodafone Essar and after acquiring Essar''s additional 33 per cent stake in the joint venture our holding will go up to over 75 per cent", Vodafone's spokesman Ben Padovan said.

This, he said is one per cent more from the Indian FDI norms which allow 74 per cent direct investment.

"So in order to be in compliance with the regulations, we could go for an IPO for the one per cent stake or might scout for an Indian partner," Padovan said.

Essar did not comment on the development saying "we are bound by confidentiality obligations under our agreement with Vodafone and therefore would not like to comment".

Earlier during the day, Vodafone issued a statement saying "Vodafone Group announces that the Essar Group has exercised its underwritten put option over 22 per cent of Vodafone Essar Limited (VEL).

"Following the exercise by the Essar Group of its put option, Vodafone has exercised its call option over the remaining 11 per cent of VEL owned by the Essar Group, resulting in a total cash payment of $5 billion," the statement said.

Call Option allows an investor the right but not the obligation to buy a stock, bond, commodity or other instrument at a specified price within a specific time period.

On the other hand, Put Option is an option contract giving the owner the right but not the obligation to sell a specified amount of an underlying security at a specified price within a specified time.

With this, Essar will exit completely from the joint venture, which is offering nationwide mobile services in India. Vodafone has over 130 million subscribers and is the third largest operator in India.

Vodafone also said that final settlement is slated for completion by November, 2011.

Sources in the know said that the completion of deal would be subject to meeting certain conditions which include Reserve Bank of India's permission as well as valuation of the deal.

Vodafone had entered Indian market in 2007 when it bought Hutchison's stake in the joint venture for over $11 billion and after that had entered into an agreement with Essar for a call and put option for its stake.

The two firms were locked in a battle over Essar's plan to list a firm that had part stake in the joint venture to find out market value of its 33 per cent stake.

The move was opposed by Vodafone saying this may not give true value of Vodafone's stake. It had approached the market regulator SEBI and also filed a petition in the Madras High Court.