FIPB defers decision on Hutch Essar deal, seeks more info
THE Foreign Investment Promotion Board (FIPB) on Thursday deferred clearance for Vodafone’s acquisition of Hutch Essar (HEL) and sought additional information from all stakeholders on the shareholding of the company. “I have sought more comments from the companies,” finance secretary Ashok Jha — who chairs the Board — told reporters after the FIPB meeting. This is the second time FIPB has deferred its decision on Vodafone’s application. The Board had taken up Vodafone’s application last week, but the deliberations were inconclusive as the RBI had not submitted its report on the shareholding pattern and the alleged violation of sectoral FDI cap. Last month, Hong-Kong Hutchison Telecommunications International (HTIL) had sold majority stake in Hutchison Essar (HEL) to Britain’s Vodafone Group Plc for $11.1 billion. The FIPB did not come to a conclusion even after hearing representatives from HTIL, HEL and Vodafone who made presentations to officials, explaining the equity structure of HEL. It seems the Board would wait for reports from various government arms before coming to a conclusion. In a related development, HTIL chief Dennis Liu told reporters in Jakarta that the company was in full compliance with FDI norms of India and it would not take much time for the sale to Vodafone to be concluded. Sources said that the FIPB could not take a call on Vodafone’s application as it was yet to receive conclusive replies from both the finance ministry and the law ministry on the extent of foreign holding in Hutch-Essar. The RBI, in its reply to the finance ministry’s query on this issue, had said that the 12.26% shareholding of HEL MD Asim Ghosh and Max India chairman Analjit Singh in HEL amounted to violations of the Foreign Exchange Management Act and the country’s FDI norms. Following this, the finance ministry has sought the law ministry’s opinion on the stake held by Mr Ghosh’s and Mr Singh. “The FIPB will take up the Vodafone application for consideration only after receiving the law ministry’s opinion, and this was unavailable for Thursday’s meet. Additionally, other agencies such as the enforcement directorate and the department of income tax have also not submitted their reports. It is also believed that the PMO after receiving complaints from many MPs has asked the department of telecom to examine the changes in HEL’s shareholdings over the last 10 years,” a source told ET. Vodafone CEO Arun Sarin on Monday told ET that the company was not concerned over the delay in getting FIPB clearance as the deal was barely a month old. "Maybe, if this question was asked six months from now, I would say that it is disappointing. The FIPB has to be given time, and I am fine with it. At the end of the day, I want FIPB, the finance ministry, the telecommunications ministry, the industry ministry and the Prime Minister to say that you are welcome here (in India). The last thing we want to do is show up one fine day and then people ask, ‘Hey, hang on, which door did you come from, was it the front door, back door or side door,” Mr Sarin had said.
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