Foreign Investment Promotion Board (FIPB) has finally cleared Vodafone’s buyout of a majority stake in Hutchison Essar.
Friday saw the culmination of three months of corporate drama as Vodafone’s 11.1 billion-deal was finally approved. With this, Vodafone has become the majority stakeholder in India’s fourth largest telecom operator - Hutch. A mere formality of Finance minister’s formal approval remains to seal the deal.
Under the deal, Vodafone has become the majority stakeholder in the Indian company with 52 per cent of Hutch’s stock. It has also got an additional control over 15 per cent stake held by two individual Indian investors and their associates. The remaining 33 per cent equity is held by India’s Essar group, of which about 22 per cent is held through a subsidiary registered in Mauritius.
Critics say the deal actually gives control of 89 percent of equity in Hutchison Essar to foreign firms and amounts to a breach of law which puts FDI limit at 74 per cent.
FIPB has put to rest any sort of criticisms and made it clear that Asim Ghosh, MD, Hutchison-Essar and Max Group Chairman Analjit Singh cannot sell stake to foreign companies. FIPB further said that although the deal was approved unconditionally, it must still conform to Press Note 3 of 2007.
Despite approving Vodafone’s 52 per cent stake, FIPB clarified that Vodafone would need to seek further approval to exercise options over a 15 per cent minority stake.
Ajay Dua, secretary of the Department of Industrial Policy and Promotion, told reporters after a meeting of the Foreign Investment Promotion Board in the Indian capital:
We are fully satisfied with the compliance level, the FIPB (Foreign Investment Promotion Board) has cleared the case, and now it will go to the finance minister for a formal approval.
Regarding the stock options of Vodafone, he said:
The Indian shareholding should also remain Indian and the parties cannot transfer the stake to a foreign entity without government approval.
Source: Bbc
