Vodafone said it was not against Essar conducting an Initial Public Offering (IPO) for their 33 per cent stake in Vodafone-Essar JV, but alleged the Indian firm did not provide material information to the Securities and Exchange Board of India (Sebi) and Bombay Stock Exchange (BSE) on the proposed merger of two companies. Essar, however, dismissed these allegations and said the company had already clarified its stand.

Essar has proposed to merge its Essar Telecommunications Holding Private Limited (ETHPL), which has 11 per cent interest in Vodafone-Essar joint venture, with another listed company, Indian Securities Limited (ISL), of the group. Vodafone has objected to this merger, saying the move may distort the valuation of the JV.

“The merger scheme between ISL and ETHPL is fully compliant with all applicable Indian laws, capital and financial sector regulations,” Essar said.

“Vodafone has not blocked Essar from conducting an IPO of its interest in Vodafone Essar. We have no objection if Essar wishes to IPO its stake,” Vodafone said in a statement. But it continues to object to the proposed merger, saying this was contrary to what has been stated in the ISL merger scheme document and it was not disclosed to the shareholders of the ISL.

“Vodafone continues to believe that material information has not been provided to the market and it has raised its objections with the Madras High Court, BSE and Sebi,” Vodafone said.

The British company had last week written to Sebi to probe a sudden spurt in the prices of ISL shares, alleging insider trading in the scrip. Essar had termed the allegations absolutely baseless.

Vodafone Essar is the third-largest telecom operator in India with 124 million mobile subscribers. Vodafone has about 67 per cent interest, while the remaining is with Ruias-led Essar in the joint venture.

Essar has said that last year it wanted to list Vodafone Essar by offering its shares through an initial public offer but Vodafone "ensured that the IPO did not go through and no market value could be established".

Essar group also accused the British telecom giant of trying to force it out of their joint venture.

Shares in ISL, which is Essar group's financial arm, have risen more than tenfold in the past 12 months.

Vodafone had objected to the merger between the two Essar group firms on January 18, saying ISL's value may be inaccurately used to calculate the value of its Indian telecom joint venture Vodafone Essar.

Vodafone paid $11.1 billion in 2007 for a 67 per cent stake in the firm.

The deal gave Essar the option to sell its entire 33 per cent stake for $5 billion by May 2011, or part of it at a market-determined price.

Vodafone has an agreement with Essar that gives it first option to buy out the latter's stake if some or all of the holding is put up for sale.

The decision to exercise either put option on or before May 8, 2011, is entirely the choice of Essar, Vodafone said in a statement.