The Hindu Business Line : FIPB clears Vodafone buy of Hutch-Essar

Hurdle cleared
FIPB had deferred decision on deal thrice
Minority Indian holding cannot be sold to foreign entity
FIPB wants review of direct, indirect holding of sectoral caps

New Delhi April 27 Vodafone's $11.1-billion buyout of Hutchison Telecom International's direct majority holding in Hutchison-Essar received clearance from the Foreign Investment Promotion Board (FIPB) on Friday.

Emerging out of the FIPB meeting, Mr Ajay Dua, Secretary of the Department of Industrial Policy and Promotion (DIPP), said: "The FIPB has cleared the case and it will now go to the Finance Minister for approval."

The FIPB had deferred a decision on the deal thrice. It looked into the shareholding pattern, including the existing holding of minority shareholders Mr Asim Ghosh and Mr Analjit Singh, to ascertain whether the 74 per cent FDI cap had been breached.

Mr Dua said that Vodafone would have to now continue compliance with Press Note 3 of 2007 that lists out terms and conditions for foreign players operating in the telecom sector.

"Their foreign holding should not exceed 74 per cent. The 15 per cent minority holding that is considered Indian should remain Indian and not be sold to foreign entity," he said.

"It should not be transferred without Government approval and the Government approval shall be given only if it is in compliance with Press Note 3."

Meanwhile, official sources said that the FIPB will now recommend that the Government completely review the direct and indirect holding of sectoral caps (for all sectors).

The board wants indirect holding to be defined in such a way that ensures it is only a genuine Indian party with full freedom and "not an Indian party who cannot sell his shares."

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