Companies cash in on new FDI norms
Faced with shortage of funds, companies have started taking advantage of the new FDI guidelines released in February. Pantaloon Retail and UTV are the early movers who intend to cash in on the positive change in the FDI guidelines. Saurabh Turakhia reports.business Updated: Apr 22, 2009 22:48 IST
Faced with shortage of funds, companies have started taking advantage of the new FDI guidelines released in February. Kishore Biyani-led Pantaloon Retail and Ronnie Screwvala’s UTV are the early movers who intend to cash in on the positive change in the FDI guidelines.
As per these guidelines, calculation of indirect FDI will exclude foreign investments in Indian companies ‘owned’ and ‘controlled’ by resident Indian citizens and/or Indian companies which are owned and controlled by resident Indian citizens. This means that any company, which has Indians holding 50 per cent equity stake in an entity and has the power to appoint a majority of its directors can raise foreign funds and the same will not amount to FDI for subsidiaries of such companies. The extent to which indirect foreign investment can be brought in has been effectively raised, with these new FDI guidelines in place.
Pantaloon Retail has decided to hive off its fashion and retail divisions to its wholly owned subsidiaries to take advantage of these new FDI norms.
Similarly, UTV has also decided ‘to consider to invest up to 49 per cent into a Indian special purpose vehicle where Ronnie Screwvala, founder promoter and his affiliates would own 51 per cent. This special purpose vehicle would own and control the business news channel UTVi. Specific queries sent to both the companies remained unanswered.