Essar says it will stay as an equity holder in Hutchison Essar, the mobile services company in which Vodafone is acquiring a majority stake.

India's Essar Group will remain as a key shareholder in the Indian provider Hutchison Essar, but will likely negotiate stronger minority shareholder rights with Vodafone, which announced it was acquiring a controlling 67% stake in the company at the beginning of this week.

Essar Group does not intend to exit Hutchison Essar, and will run the company together with Vodafone, Essar Group vice chairman, Ravi Ruia told reporters after Vodafone chief executive Arun Sarin met him yesterday in Mumbai.

The terms for cooperation between Essar and Vodafone were laid out later in a statement from the Essar Group. "We will ensure that all of our shareholder rights, including under our shareholders' agreement with Hutchison, are adhered to," Essar Group said.

This gives the Group the right of first refusal to the proposed sale of its equity by Hutchison Telecommunications International Limited (HTIL), according to informed sources. This right does not apply to the sale to Vodafone, Sarin told reporters this week. But the Essar Group could tie down Vodafone in protracted litigation. It is more likely to use this clause in the shareholder agreement with HTIL to negotiate a more favourable shareholder agreement with Vodafone, the sources said.

The Essar Group holds 33% in Hutchison Essar. Vodafone has said it would prefer Essar stayed as a partner, but if it chose to exit it would offer to buy its stake for the same price per share it is offering HTIL.

Essar hasn't entirely ruled out divesting from Hutchison Essar. Vodafone has approached Essar to discuss a possible partnership as regards the Indian division, the Essar Group said. It will decide its future course of action in due course and in the best interests of the Essar group, it added.