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BPL has said that the funds would be used for BPL Mobile's expansion in Mumbai and its stake in Loop Telecom.

Ruia-owned BPL Mobile has sold about 17% stake for $80 million to an unknown Mauritius based fund. In its statement the firm has said that it has issued shares to a Mauritius based company owned by an international institutional fund investing in emerging markets. The statement added that funds raised from this issuance  have been used for BPL Mobile's expansion in Mumbai and its stake in Loop Telecom. BPL Mobile holds a majority stake in Loop which recently won all-India GSM license. These details have come out because of the ongoing arbitration proceedings between Vodafone Essar Ltd and the Essar Group over the ownership of BPL Mobile.  

"BPL believes that the capital issuance was not in violation of the operative interim orders of the arbitrator," the statement said. The entity which has invested the money is called Gytsy Rover. According to this report Gytsy has bought the stake three deal since October last year and has invested a much higher amount of around $200-250 million rather than $80 million. 

With the new share holding structure, BPL Communications holding has gone down from 74% to 61%. Also Ruia's stake in the firm now stands at 8.2% while Mauritius-based investment company CapitalGlobal's is now 13% from 16%. 

The statement added that arbitrators have asked BPL Mobile and its shareholders to maintain status quo in BPL Mobile and no fresh issuance of equity by BPL Mobile and no sale of its existing shares in Loop to be made without their approval. BPL had appointed Citigroup Global Market India, Citibank's investment banking arm, and Standard Chartered Bank as advisors to sell majority stake in Loop. 

Tensions between Essar and Vodafone have been rising for some time now. Recently Essar Group had hired Hutch Indonesia president Rajiv Sawhney to head Loop Telecom. This would bring Ruia's in direct in direct competition with Vodafone Essar, in which the former owns 33%. 

Hutchison Essar, before the acquisition Hutch's stake by Vodafone, bought out the promoters of four BPL circles in Mumbai, Maharashtra, Tamil Nadu and Kerala in July 2005. The networks in the three other circles apart from Mumbai  were merged into Hutchison Essar in September. Hutchison Essar transferred majority ownership rights in BPL Mobile to Essar pending regulatory approval for the merger. 

But the regulatory permissions for the merger of the Mumbai licensed area got delayed and Essar terminated the ownership rights agreement. After this Hutchison Essar went to court and got an injunction restraining Essar from selling, transferring or mortgaging shares in BPL Mobile. Then Bombay high court referred the dispute to arbitration in August 2006.