Facebook seeking legal advice on India’s FDI before finalising the Jio investment

Prashasti Awasthi Mumbai | Updated on June 24, 2020 Published on June 24, 2020

Social media giant Facebook is seeking legal advice on India’s Foreign Direct Investment (FDI) towards neighboring countries, especially China and HongKong.

This comes ahead of finalizing the deal of $5.7 billion in Reliance Jio Platforms in order to ensure no issues with the deal in the future, as per media reports.

Facebook is based out of the United States. However, numerous stakeholders of Facebook are based out of China and Hong Kong as it is a public company.

The social media company has shareholders, including hedge funds and financial institutions, in both Hong Kong and mainland China.

According to a Business Standard report, Facebook is consulting the Big Four consultancy firms — PriceWaterhouseCoopers (PwC), Ernst & Young (E&Y), Deloitte, and KPMG — to advise it on the new “beneficial ownership” norms that would apply to the proposed investment in Jio.

This April, the Centre revised the foreign direct investment (FDI) guidelines to shield Indian companies from “opportunistic acquisitions” by investors, particularly from China. Now, all investments will have to go through the government channel and not automatic approval.

As per the new guidelines, the Indian government has initiated a preliminary screening process for all investments coming in from neighboring countries. This would include all investment activities from China, Pakistan, Nepal, Bangladesh, and Myanmar.

The new rules will also be applicable to ‘the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly.

According to Business Standard sources, that the approvals have to be sought by the investors and not the companies they are aiming to invest in. In case the new FDI policy applies to indirect investments from China, Facebook would require approval from the concerned ministries in India.

Another report by the Inc42 noted that the policy is ambiguous, particularly with regards to treating indirect investments.

While Facebook is clearing out its path for the potential FDI approval need, the competition commission of India (CCI) will be scrutinizing the Reliance Jio Platforms and Facebook deal.

CCI Chairman Ashok Kumar Gupta, in an email interview with Bloomberg, noted that the competition watchdog is looking to prevent the misuse of data in all the deals it assesses.

He further added that it has also been formulating new parameters that should be included in its assessment criteria. However, he has not commented on the Jio-Facebook deal pending examination.

Reliance’s Jio Platform has raised INR 1.15 Lakh Cr from global investors like Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, Abu Dhabi Investment Authority (ADIA), TPG, Public Investment Firm (PIF) and L Catterton in 58 days, as per the Inc42 report.

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Published on June 24, 2020
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