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Modi Group set to exit from Nepal JV

The Indian firm is poised to exit from a controversial JV in which the King's son-in-law has a stake.

india Updated: Apr 17, 2006 11:45 IST

India's Modi Group, the owners of Spice Cell, Modi Xerox and Modi Rubber, seems poised to exit from a controversial telecom joint venture in Nepal in which King Gyanendra's son-in-law has a stake.

Spice Nepal, a joint venture between Spice Cell, investment company from Kazakhstan, Visor, and Nepali investors, became the first private company in the kingdom to start cellular phone services last year.

The venture was dogged by controversy from its very inception when the original Nepali partners, the Khetan Group, pulled out and Visor and other Nepali investors moved in.

While Visor holds 75 percent of the shares and Spice Cell just five, the remaining are owned by the Raj Group, headed by Raj Bahadur Singh, the king's son-in-law, and other Nepalis, mostly non-residents.

The new partners moved in when Nepal was passing through unprecedented turmoil, with the king engineering a coup during which all telecom links were snapped.

Though ordinary telephone lines were restored within a week, mobile telephone services, then offered only by the state-run Nepal Telecom Authority, remained suspended for months.

They resumed only after telecom workers threatened to go on strike, alleging the state entity was kept shut to give an unfair advantage to Spice Nepal, which was due to launch its services.

The new partners in Spice Nepal have upped their equity since then and have been asking the Modi Group to pay the additional amount. It comes to about Nepali Rs 4.5 million ($62,000) for 50,000 shares.

However, despite two notices to the Modi Group last year, the Indian company, currently going through a difficult phase, has not responded.

On Monday, Spice Nepal served a public notice to the Indian partner, giving them 30 days to pay up. If it doesn't respond, current shareholders would have the first right to buy up the shares.

Nepal's telecom sector has become a highly risky proposal for investors since the royal coup.

Whenever there is fresh unrest, the royalist government has been shutting down mobile phone services.

"We are losing money," royalist minister Shrish Shumsher Rana, who is also the government spokesperson, admitted this week after the state shut down mobile phones yet again for four days.

First Published: Apr 17, 2006 11:45 IST