The Foreign Investment Promotion Board (FIPB), in a letter dated May 7, has sent its approval to the UK-based Vodafone for buying a 51.96% in Hutch Essar.
NEW DELHI: After much debate and delay, Vodafone’s acquisition of a controlling stake in Hutch seems to have crossed the final hurdle. The Foreign Investment Promotion Board (FIPB), in a letter dated May 7, has sent its approval to the UK-based Vodafone for buying a 51.96% in Hutch Essar, the country’s fourth-largest mobile operator. FIPB had on April 27 cleared Vodafone’s application.
The approval letter says that minority shareholders (Asim Ghosh group, Analjit Singh group and IDFC) “shall each separately undertake that not withstanding any agreement it may have entered into with any other party, it will not transfer to any foreign entity its financial and economic holding or interest in Hutch Essar (whether held directly or indirectly through one or more entity) without the prior consent of the government.”
The letter also stresses that the company’s foreign shareholding should be compliant with the Press Note 3 on FDI cap and other provisions contained in it. In the telecom sector, the FDI cap is at 74%.
The letter states that the foreign collaborator must not have any existing joint venture or technology transfer agreement for which the approval has been granted.
In this case, Vodafone had a JV with the Bharti group prior to buying a controlling stake in Hutch Essar. But, recently, Vodafone offloaded its 5% direct stake in Bharti. The world’s biggest mobile operator, however, retains an indirect stake of around 5% in the Bharti group.
FIPB had also then suggested that the government should review the FDI norms across all sectors, by clearly defining ‘direct’ and ‘indirect’ holding.
Meanwhile, sources said, Telecom Watchdog, the NGO which had moved the Delhi High Court two months ago, alleging that the 15% minority shareholding in Hutch Essar was actually a Hutch ‘front’, is exploring further legal option.
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