26% Equity Selloff Must For Foreign IT-enabled Firms

New Delhi, April 24: | Updated: Apr 25 2002, 05:30am hrs
Foreign companies providing IT-enabled services and value-added telecom services in the country will have to compulsorily divest 26 per cent equity to the public within five years of starting operations.

However, companies providing IT-enabled services registered under Software Technology Park (STP) scheme will be exempted from the divestment clause.

According to a commerce and industry ministry source, the 26 per cent divestment condition will be applicable to ISPs, infrastructure providers, and those engaged in electronic mail, voice mail and B2B e-commerce, if the foreign company is listed in other parts of the world.

The clause has been stipulated as an entry-level condition for companies in certain industries. Recently, Coca-Cola India has applied to the government for a waiver of this condition.

The government has taken the view that in the case of Stream Tracmail Ltd, engaged in IT-enabled services, the divestment condition will be waived off as the company is registered under the STP scheme.

Stream Tracmail was earlier granted approval for providing services in the area of internet and internet-enabled communications and services. The company has stated in its application that it is basically engaged in call centre activity, an IT-enabled service. It has received permission from the software technology parks in India and the Department of Telecom to set up an international call centre.

The company had sought exemption from the divestment clause as the foreign direct investment (FDI) is under the scheme. The source said that the Department of Telecommunications and Department of Information Technology supported the proposal. The Foreign Investment Promotion Board felt that the divestment condition needed to be examined and hence directed the Secretariate of Industrial Approval (SIA) to study it.

While clearing Stream Tracmail’s proposal, the government has told the company that it will not engage in ISPs, infrastructure providers (providing dark fibre), electronic mail and voice mail.

The company has communicated to the government that the services it provides would be subject to licensing and security requirements wherever required and it would not set up any gateway (satellite or submarine).

In the scheme of things now, companies are allowed to bring in 100 per cent FDI in the information technology sector through the automatic route. FDI up to 100 per cent is allowed in ISPs not providing gateways, infrastructure providers, electronic mail and voice mail with certain conditions.

The government allows FDI up to 74 per cent in telecom services including internet service providers with gateways, radio paging and end-to-end bandwidth.