Vodafone last night sought to fend off concerns about its involvement in the $20 billion (£10.36 billion) bid battle for Hutchison Essar, India’s fourth-biggest mobile player, insisting that it would not overpay.

The mobile operator, which is facing mounting investor concern about over-exuberance in a heated race, vowed not to breach the strict financial criteria recently introduced by Arun Sarin, its chief executive.

Its defence came as the battle for the Indian operator intensified with an alliance of four of the world’s biggest buyout groups behind Reliance, one of Vodafone’s rivals.

Apax, KKR, Carlyle and Blackstone are understood to be close to joining forces to back Reliance, India’s second-largest mobile operator, in its efforts to secure Hutchison Essar.

A Vodafone spokesman said: “Any acquisition would fit with our published financial mergers and acquisition criteria.”

As the battle for Hutchison’s 67 per cent stake in the venture has hotted up and more deep-pocketed rivals such as the billionaire Hinduja brothers have entered the fray so the price for the asset has soared. Analysts now put an enterprise value on the entire group, including debt, of about $20 billion.

Both Vodafone and Essar — the 33 per cent joint venture holder — have tabled formal preliminary offers.

Although funding is not regarded as an issue for Vodafone, which is expected to pay all-cash if successful, analysts are concerned that the group might be dragged into paying a hefty premium.

Their concerns have not been helped by Vodafone’s failure to explain to them exactly how it will ensure that it does not breach its mergers and acquisitions guidelines. The guidelines were made public only recently as part of efforts by Mr Sarin to appease investor concern about the group’s share-price performance under him.

Richard Marwood, a fund manager at AXA, which holds just under 1 per cent of the stock, said that although it was reasonable for Vodafone to examine such opportunities he did not want it to return to the strategic, footprint-building deals of its old days. “We do not want them to pursue it at all costs. If it cannot make the numbers stack up, then it should walk away,” he said.

Analysts at JPMorgan said preliminary calculations suggested that Vodafone’s strict mergers and acquisitions criteria “might be stretched”. Their comments followed a warning earlier in the week from State Street, a key investor in Vodafone.

Mr Sarin, who is leading the Vodafone negotiations, had his reputation seriously damaged by a similar frenzied auction in 2004 — the $41 billion AT&T Wireless battle in the US. Vodafone’s bid failed and Mr Sarin was criticised for having a lack of communication with the City.

However, backers of the chief executive point out that he was able then to “take the brave decision” and walk away from the auction when it went beyond the level at which he felt it could deliver shareholder value.

Sources with knowledge of the Hutchison Essar bid battle, which is being handled by Goldman Sachs, said that it was fast becoming a more formal auction, with a “crystallisation” around two key players expected soon.

Detailed due diligence is expected to begin shortly and a winner could come as early as the end of this month.

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