The Hindu Business Line : FIPB meet may take up Vodafone deal today

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FIPB meet may take up Vodafone deal today

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UK co's Director meets Telecom Secretary on stake acquisition

Central issue
The centre of controversy is the 12. 26 per cent stake held by minority shareholders, which is allegedly being held on behalf of HTIL.

New Delhi March 28 With the Foreign Investment Promotion Board (FIPB) likely to take up the proposal of Vodafone's acquisition of Hutchison Telecom International Ltd's (HTIL) stake in Hutchison Essar on Thursday, the UK company's Director, Mr Mathew Kirk, met Mr Dinesh Mathur, Secretary, Department of Telecom, a day ahead of the crucial meeting.

FIPB is investigating allegations made by a consumer group that HTIL had breached the country's FDI norms by indirectly holding up to 67 per cent stake in the cellular company routing it through minority shareholders Mr Asim Ghosh, Managing Director, Hutch Essar, and Mr Analjit Singh, Chairman, Max Group. While senior DoT officials said that the telecom department had no objections to the proposed sale, Government approval was dependant on the views expressed by the Reserve Bank of India and the Law Ministry.

The issue is also sub-judice with the Supreme Court taking up the petition filed by the consumer group Telecom Watchdog. While the RBI has already sent a note expressing its reservations against the deal, the Law Ministry is yet to give its opinion. FIPB is likely to take up the case only after the Ministry gives its opinion. The centre of controversy is the 12. 26 per cent stake held by Mr Ghosh and Mr Singh, which is allegedly being held on behalf of HTIL. Once Vodafone acquires HTIL's stake then it is alleged that the two individuals would be acting as fronts on behalf of the UK company to comply with the FDI cap of 74 per cent.

The Essar Group has 33 per cent stake in Hutchison Essar, of which, 22 per cent is held through a foreign entity. This allows Vodafone to hold only 52 per cent stake. If the stake held by Mr Ghosh and Mr Singh is added, the total FDI goes up to 86 per cent. The RBI has informed FIPB that the transaction circumvents the Foreign Exchange Management Act (FEMA). The two individual shareholders, along with Vodafone and HTIL, have been asked by FIPB to clarify their position on Thursday. HTIL would be represented by legal firm Amarchand Mangal Das and Vodafone by Mr Kirk.

Dismissing the allegations, Vodafone had said that it had indeed acquired only 52 per cent held by HTIL in Hutchison Essar and not 67 per cent as was being alleged. Vodafone will own a 42 per cent direct interest in Hutch Essar through its acquisition of 100 per cent CGP Investments (Holdings) Ltd (CGPIL). Through CGPIL, Vodafone will also own 37 per cent in Telecom Investments India Private Ltd (TII), which in turn owns 20 per cent in Hutchison Essar. TII has 38 per cent in Omega Telecom Holdings Private Ltd (Omega), which in turn owns 5 per cent in Hutchison Essar.

Both TII and Omega are Indian companies. These investments put together give Vodafone a controlling interest of 52 per cent.