Vodafone clearance deferred again

New Delhi, Mar 29 | Updated: Mar 30 2007, 06:16am hrs
The Foreign Investment Promotion Board (FIPB) on Thursday deferred for the second time a decision on the acquisition by the UKs Vodafone of a controlling stake in the countrys fourth largest mobile operator, Hutch Essar, from Hong Kong-based Hutchison Telecommunications International Ltd (HTIL).

Sources said the FIPB has sought documents relating to the loan agreements between minority shareholders Asim Ghosh, managing director, Hutch Essar, and Analjit Singh (who together hold 12.26% in Hutch Essar) and HTIL, which have now been transferred to Vodafone.

They said the FIPB sought this information to ascertain if the 74% FDI cap was being breached. The board would consider their response, as well as legal opinion from the law ministry and the final views of the RBI on any possible violation of the Foreign Exchange Management Act, at its next meeting.

Finance secretary Ashok Jha, who is also the FIPB chairman, said more information was sought from the concerned companies. They had agreed to provide the necessary details in the next three or four days, he added.

Call Waiting

FIPB has sought loan agreement papers from concerned parties
Legal opinion on alleged Fema and FDI violations awaited
Final, conclusive RBI report still to come

Thursdays FIPB meeting followed presentations by Ghosh, who individually holds 4.68% in the company, a Vodafone team led by Mathew Kirk, director, external, and law firm Amarchand Mangaldas, representing HTIL. The presentations lasted an hour.

Sources said though a decision was deferred, some members were of the view the company could be granted approval. If at any stage it was found the company had violated the 74% FDI cap, it could be asked to divest the excess stake to Indian entities.

The controlling stake of 52% in Hutch Essar held by HTIL was acquired by Vodafone on Februrary 11. The Essar group holds 33% in the company, of which 22% is FDI routed through its Mauritius-based arm.