The Wadias appear to have won the first round in their attempt to block fresh investments in India by foreign partner Groupe Danone. Acting on a complaint by the Wadias, the Foreign Investment Promotion Board (FIPB) and other wings of government are of the view that the French food major?s acquisition of minority shares in biotech firm Avestha Gengraine Technologies Pvt Ltd (Avesthagen) is a violation of foreign direct investment (FDI) policies.
The government?s stand follows preliminary investigations by the enforcement directorate that show Danone?s investment in Avesthagen violates the provisions of Press Note 1 (2005), which mandates a no-objection certificate from a foreign company?s existing Indian joint venture partner before making fresh investments in the same area.
In January, Bangalore-based Avesthagen announced it was raising $25 million (around Rs 150 crore) from Groupe Danone, Group Limagrain (a French company with interests in R&D and seeds trading) and two other strategic investors. Danone investment arm Daninvest had invested $4.5 million (nearly Rs 27 crore) in R&D for bio-nutritional products, in the process picking up nearly 5% stake in Avesthagen.
The Wadia group objected to Danone?s investment in Avesthagen and had called it a breach of contract. The feuding Danone and Wadias hold equal stake in a joint venture company that controls Britannia Industries Ltd. The Wadias are of the view that under the terms of the agreement with Danone, any investment the French partner makes in India would be routed through the joint venture.
A senior government official said, ?Preliminary investigations have also shown that Avesthagen has inducted FDI without prior approval despite being a holding company.? Officials also said that once ongoing investigations are concluded, the government would consider what action could be taken against both Avesthagen and Danone.
Besides, the government is also of the view that Avesthagen and AVA Seeds?Avesthagen holds a 30% stake in the company, with the remainder held by Limagrain?cannot undertake any activity in agriculture, as it is prohibited under FDI policy.
AVA Seeds also wants to make downstream investments in Cee Kay Seeds & Seedlings Pvt Ltd. Government sources said that this investment could also come under scrutiny as Cee Kay is engaged in the production of genetic materials, germplasm, as well as foundation seeds and vegetable seeds.
