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Moumita Bakshi Chatterjee

New Delhi, Sept. 21 The Foreign Investment Promotion Board (FIPB) Secretariat under the Department of Economic Affairs has written to the Enforcement Directorate to investigate French food major Groupe Danone’s acquisition of minority shares in biotech firm Avestha Gengraine Technologies Pvt Ltd (Avesthagen). The FIPB has found prima facie violation of FDI policy in the Danone’s investment.

“We have examined the case and there is a prima facie violation of the FDI policy. Our investigations revealed that a subsidiary of Avesthagen is in the same field as an existing joint venture (JV) of Danone. Under Press Note 1 they needed Government’s prior approval for venturing into the same field in case there is an existing JV,” sources said, adding that FIPB has written to the Enforcement Directorate to investigate the issue, and – in case allegations were found to be true – to initiate prosecution.

During the investigation, it is learnt that the FIPB had also sought the Reserve Bank of India and Danone’s inputs on the issue.

In January this year, Bangalore-based biotechnology company Avesthagen had announced raising of €25 million (around Rs 150 crore) from Groupe Danone — Groupe Limagrain and two other strategic investors. Food major Groupe Danone’s arm Daninvest had invested €4.5 million (nearly Rs 27 crore) in R&D for bio-nutritional products, in the process picking up nearly 5 per cent stake in the company.

The Wadia family had objected to Groupe Danone’s investment in Avesthagen and had called it “a breach of contract”. Danone and Wadias hold equal stake in a joint venture company that controls Britannia Industries Ltd. The Wadia family had earlier made it clear in press statements that as per the terms of the agreement between Danone and themselves, any investment Danone wished to make in India had to be routed through the joint venture.

The FIPB objections seem to come in the backdrop of Avesthagen’s 2005 acquisition of Good Earth, a health food business started by actress Waheeda Rehman. Avesta Good Earth Foods P Ltd is a wholly owned subsidiary of Avesthagen and manufactures breakfast cereal and energy bars.

Both Avesthagen and the Wadia family were not available for comment. Danone also could not be reached for comments.

If the Enforcement Directorate finds violation of the FDI policy, it could give a new twist to the Wadia-Danone tussle, which is currently taking place on the Intellectual Property (IP) issue of Britannia’s Tiger brand of biscuit.

More Stories on : Bio-tech & Genetics | Foreign Direct Investment | Mergers & Acquisitions | Regulatory Bodies & Rulings | Pharmaceuticals

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