The cost to Vodafone Group of buying a controlling stake in India's Hutchison Essar may turn out to be more than the $11.1 billion the firm agreed to pay, the Financial Times reported on Thursday.
In a briefing paper to the Indian regulator vetting the proposed deal, India's law ministry said Vodafone would not be permitted to fix the price at which it could eventually exercise an option over a 12.26% stake in Hutchison Essar, according to the FT.
The document, which the FT said it had seen, raised questions about whether Vodafone could buy the 12.26% stake, which is held indirectly by two Indian businessmen, for as little as $430 million, according to the newspaper.
The FT said Indian foreign exchange management laws blocked overseas firms from using pre-determined pricing formulae to set the terms on which they buy out Indian partners if and when foreign direct investment ceilings are eased.
The law ministry told the Foreign Investment Promotion Board that shares in an unlisted Indian firm may not be bought by a non-resident at "less than a fair valuation", the FT said.
A comment was not immediately available from Vodafone.
Vodafone agreed in February to buy 67% in Hutch Essar, India's fourth-biggest mobile firm, from Hutchison Telecommunications International for $11.1 billion.
Hutchison Telecom directly owns 52% of Hutch Essar. The FT said a further 12.26% stake is held on the company's behalf by firms owned by Asim Ghosh, managing director of Hutch Essar, and Analjit Singh of health care group Max India.
In addition, India's Essar Group owns 33%, 22% of which is held overseas as foreign holding.