The Foreign Investment Promotion Board (FIPB) will take up the Vodafone proposal to acquire Hutchison Telecommunications International Ltd’s stake in Hutch-Essar when it meets on Monday, but the board’s decision will depend on reports by government agencies, some of which are yet to come in.
The law ministry and the Reserve Bank of India have given their views on the deal.
According to sources, after a missive by the National Security Council (NSC) secretariat for a thorough scrutiny of the stake sale, investigating agencies are taking extra time to complete their findings. However, the FIPB is expected to set a final deadline for these agencies to submit their recommendations.
The FIPB is scheduled to meet on Monday for the third time to discuss the acquisition of Hutchison Telecom International’s controlling stake by British telecom giant Vodafone and to decide if the deal breached foreign investment norms set out for the telecom industry.
The FIPB meeting, which comes days after the government notified a 74 per cent limit on foreign direct investment in the telecom sector, is likely to see officials discussing whether the foreign shareholding in Hutch-Essar has crossed this limit. The Ruia-controlled Essar group is the junior partner in Hutch-Essar with a 33 per cent stake.
In February, Vodafone had acquired Hutchison Telecommunications International’s 52 per cent holding in the Indian company, in which Essar owns 22 per cent through a foreign holding firm, taking the foreign direct investment in the company to 74 per cent. The issue now revolves around whether to approve the 15 per cent stake held in Hutch-Essar by development financial institution IDFC, Hutch-Essar Managing Director Asim Ghosh, and Max India Chairman Analjit Singh.
Sources said a final decision could be taken at the next FIPB meeting. The FIPB has a pressing need to decide on the issue as a court-directed deadline approaches on May 9 to complete a probe into Hutch-Essar’s shareholding pattern.