Tata Sons gets RBI nod to buy DoCoMo's stake in telecom JV | business | Hindustan Times
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Tata Sons gets RBI nod to buy DoCoMo's stake in telecom JV

Tata Sons has got an approval from the RBI to buy Japanese telecom firm NTT DoCoMo's stake in their struggling joint venture, Tata Teleservices, for Rs 7,250 crore after the central bank changed its rule.

business Updated: Jan 14, 2015 20:31 IST

Tata Sons has got an approval from the RBI to buy Japanese telecom firm NTT DoCoMo's stake in their struggling joint venture, Tata Teleservices, for Rs 7,250 crore after the central bank changed its rule.

The Reserve Bank of India (RBI) last month informed the finance ministry that it was "inclined to accept" the proposal of Tata to buy DoCoMo's 26.5% stake at Rs 58 per share, half the rate which the Japanese firm originally paid.

Sources said the central bank said the "structure of the contract is such that the investor, in any circumstances, if it intends to exit, will receive at least Rs 58.045 or higher per share."

As per RBI norms, the non-resident investor is not guaranteed any assured exit price at the time of making such investment and shall exit at a fair price computed as above at the time of exit.

Taking into account RBI norms, the structure of contract between Tata Sons and NTT Docomo is not in line with the provisions as the fair value of shares is Rs 23.34 per share.

However, sources said the RBI is of the view that larger issue here is of a fair commitment in the contracts in relation to an investment and a downside protection of an investment, rather than an assured return. "Besides, our strategic relationship with Japan in recent times in relation to FDI flows is also a matter to be kept in view.

In view of this, we are inclined to accept the proposal and in future, in all such cases, similar principal shall be applied," RBI is believed to have said to the finance ministry.

RBI has sought the Finance Ministry's views on it, sources said. When contacted, a Tata Sons spokesperson said, "As you are aware, Tata Sons has made the necessary application to the Reserve Bank of India.

The company is awaiting a response." DoCoMo in July last year announced plans to exit Tata Teleservices, the seventh-biggest mobile phone carrier in India. The exit, it had said, was to happen as per the 2009 agreement with Tatas when the Japanese firm invested USD 2.2 billion in Tata Teleservices. As per the agreement, it was to get the higher of either half the original investment or a fair value.