The Hindu Business Line : JM Fin Ventures’ FDI proposal rejected

The Foreign Investment Promotion Board (FIPB) has stated that ‘investment company’ operation is not among the permitted 18 NBFC activities eligible for foreign direct investment.

The Board has turned down a proposal by JM Financial Ventures Ltd, which is currently engaged in making investments in Indian companies, to induct 46.4 per cent foreign investment worth Rs 371 crore, on these grounds.

JM Financial Ventures, which is registered with RBI as a Non-Banking Financial Company (NBFC), is part of the JM Financial Group.

The company clinched investment commitments from three large global institutional investors – Blue Ridge Capital LLC, Tiger Global Management LLC, and Eton Park US. All three are portfolio managers managing funds for other reputed endowment and pension fund investors. The three investors agreed to invest in the company at a minimum price of Rs 475 a equity share, which represents almost 111 per cent premium to the Rs 225 a equity share price according to the CCI valuation guidelines.

At present, JM Financial holds 97.98 per cent in the company, while 2.22 per cent is being held by Kampani Consultants Ltd. According to the proposal, pursuant to the induction of foreign funds into the company, the proposed shareholding of Blue Ridge, Tiger Global and Eton Park would stand at 25.08 per cent, 15.05 per cent and 6.27 per cent, respectively.

The company had further pointed out that the aggregate holding of the foreign investors in the share capital of JMFVL would not exceed 46.4 per cent of the total paid-up capital. The majority shareholding would still continue to remain with JM Financial Group after the proposed preferential allotment of equity shares to the foreign investors; and the representation on the Board would also remain with Indian shareholders.

However, sources pointed out that the activity proposed by the company was that of an ‘investment company’ which is not one of the permitted 18 NBFC activities eligible for FDI. The company officials could not be reached for comments.

More Stories on : NBFCs | Foreign Direct Investment | Financial Services

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