Although the RBI has written to the FIPB last week, stressing the need for a further scrutiny, the Board had asked the RBI to submit a ‘conclusive’ report.
NEW DELHI: The Reserve Bank of India (RBI) is learnt to have submitted a formal report to the Foreign Investment Promotion Board (FIPB), explaining its stand on the Vodafone-Hutch deal.
Although the RBI has written to the FIPB last week, stressing the need for a further scrutiny, the Board had asked the RBI to submit a ‘conclusive’ report.
According to its conclusive report, the RBI wants the government to further investigate the Hutch Essar shareholding structure and those of the minority shareholders in the company, as it suspects violation of government guidelines, mainly Foreign Exchange Management Act (FEMA).
The Hong Kong-based Hutchison Telecom International Ltd’s (HTIL) loan to minority shareholders Asim Ghosh and Analjit Singh for a 15% stake in Hutch Essar, through a complex route, could be a violation of the external commercial borrowing norms issued under FEMA, the RBI is understood to have said. RBI officials refused to comment.
This two are reportedly fronting for HTIL, and hence, the 15% minority shareholding is interpreted as a foreign stake.
Both Asim Ghosh and Analjit Singh have clarified that they have 100% ownership rights and unrestricted voting rights over their shares in Hutch Essar.
The Department of Telecommunications (DoT), the licensing authority for telecom companies, has also written again to the FIPB, giving details of the shareholding structure in Hutch Essar over the past several years.
Even though DoT had not raised any objection to the Hutch-Vodafone deal, the FIPB had asked the telecom department to give further details.
A senior DoT official told DNA Money on Friday that FIPB had sought further information and that “the details on shareholding structure in Hutch Essar has been submitted to the Board”.
Meanwhile, at an FIPB meeting on Thursday, HTIL and Hutch Essar were asked to submit the details on the loan agreements with the minority shareholders - Asim Ghosh and Analjit Singh—and other shareholder documents within a few days. But, Vodafone CEO Arun Sarin told an investors conference that FIPB clearance for buying Hutch was just a few weeks away.
Earlier this year, the world’s largest mobile company, Vodafone, struck a deal with HTIL to buy its 52% direct stake in Hutch Essar and economic interest in another 15% held by minority shareholders (Hutch Essar managing director Asim Ghosh, Max India chairman Analjit Singh and IDFC) for $11.1 billion, at an enterprise value of $18.8 billion.
Essar, with a 33% stake in Hutch Essar, out of which 22% is with a subsidiary incorporated in Mauritius, would partner Vodafone in the new venture.
After the deal was struck, Telecom Watchdog, an NGO, had alleged in the Delhi high court that the FDI level in Hutch Essar (now Vodafone Essar) was much beyond the permitted 74% in the telecom sector.
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