The Hindu Business Line : Danone’s FDI issue slows proposal with Avesthagen

New Delhi, Oct 15 Pending the issue of ‘prima facie’ violation of FDI policy by Groupe Danone’s acquisition of minority shares in Avesthagen - a bone of contention between the Wadias and Danone - the Finance Ministry is contemplating a new FDI proposal involving an Avesthagen joint venture.

The new FDI proposal involves Ava Seeds - a 30:70 joint venture between biotech firm Avestha Gengraine Technologies (Avesthagen) and Limagrain.

According to sources, since the matter pertaining to the FDI violation in Groupe Danone’s investment in Avesthagen has been referred to the Enforcement Directorate, the issue now is whether to take up the proposal of a downstream company of Avesthagen till the previous case is settled. The new proposal involves setting up of Ava Seeds as a ‘holding company’.

When contacted, Dr Villoo Morawala Patell, founder and Managing Director of Avesthagen, said, “Ava Seeds has applied for Government’s approval. Since Limagrain will hold 70 per cent stake in the company, it needed FIPB approval. Multiple seed companies will also be bought under Ava Seeds.”

As part of its agri-biotech business unit ‘Seed for Food’, Avesthagen with its strategic partner Limagrain, is setting up a technology driven Indian seed business through acquisition of Indian seed companies following which technologies and germplasm from both parties would be used for new product development. Two joint venture companies have been registered between Avesthagen and Limagrain – Atash Seeds Pvt Ltd (where Avesthagen has a majority holding); and Ava Seeds Pvt Ltd. Atash Seeds will be a special purpose vehicle to jointly develop field crops seed activity, while Ava Seeds will develop the vegetable seed business.

It may be recalled that last month, the Department of Economic Affairs had written to the Enforcement Directorate to investigate Groupe Danone’s acquisition of minority shares in Avesthagen, after its examination revealed that a subsidiary of Avesthagen was in the same field as an existing joint venture of Danone.

The DEA had found prima facie violation of FDI policy in Danone’s investment.

In January this year, Avesthagen had announced raising €25 million (around Rs 150 crore) from Groupe Danone, Group Limagrain and two other investors. Food major Groupe Danone’s arm, Daninvest had invested €4.5 million 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 calling it “a breach of contract”.

Related Stories:
Britannia initiates legal action against Danone
Wadia, Danone hold talks to break impasse
Britannia, Danone play down impact

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