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Saturday, Nov 23, 2002

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FIPB rejection trips Tata Tele-HNS Inc share arrangement

Ambarish Mukherjee

NEW DELHI, Nov. 22

THE Foreign Investment Promotion Board (FIPB) has rejected Tata TeleServices Ltd's (TTL) proposal to issue redeemable preference shares (RPS) and warrants against receivables to Mauritius-based HNS Inc.

The RPS and warrants together amounted to $25 million. The FIPB has rejected the proposal following recommendations from the Department of Economic Affairs.

The proposal has been rejected, according to informed sources, on the ground that imports are current account payables while RPS represents a capital account, which cannot be swapped as per the existing policy. According to the proposal submitted to FIPB, TTL had sought permission to issue certain number of RPS with a face value of Rs 10 each and warrants equivalent to one TTL share at an exercise price of Rs 12 to HNS Inc.

The value of the RPS and warrants pegged at $25 million is equivalent to the amount receivable by the foreign company against imports by Hughes India Ltd (HTIL), the company in which TTL would acquire 440,824,709 equity shares, which has been okayed by FIPB.

As a result of the acquisition, the foreign lenders of HTIL had assigned to TTL foreign currency payables due from HTIL and TTL wanted to settle the dues by issuing RPS and warrants to the foreign lenders which has now been blocked by the Government.

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