Chidambaram clears Vodafone deal
May 4, 2007 - 6:05:09 PM
New Delhi, May 4 - Within a week of the Foreign Investment Promotion Board - giving its green signal to Vodafone's acquisition of a majority stake in Hutch-Essar, the British telecom giant cleared the last hurdle Friday by getting Finance Minister P. Chidambaram's nod.
According to Ajay Dua, secretary, department of industrial policy and promotion - and also a member of the FIPB, the Vodafone deal to acquire India's fourth largest mobile service provider for $11.1 billion has been cleared.
In February, Vodafone had announced its acquisition of 52-percent controlling stake in Hutch-Essar from Hong Kong-based Hutchison International.
India's Essar Group of the Ruias has 33-percent stake in it of which 22 percent is through a foreign source, Essar Mauritius.
The remaining equity of 12.26 percent is owned by Asim Ghosh, managing director of Hutch-Essar, and Max India chairman Analjit Singh, who had taken Hutchison International as the guarantor for obtaining a loan to buy the stake.
Hence the FIPB, which is a government body whose clearance is mandatory for any foreign investment and is headed by Finance Secretary Ashok Jha, had doubts if the telecom FDI limit of 74-percent would be adhered to after the acquisition.
However, last week it gave a green signal saying the shareholding pattern of the deal does not violate the Indian telecom FDI norms.
The matter was also challenged in a public interest litigation by an NGO called Telecom Watchdog. But the Delhi High Court, in an order delivered on March 9, directed the FIPB to examine the matter and complete the probe within two months.
It was earlier decided that Essar's vice chairman Ravi Ruia would be chairman of the new joint venture, while Vodafone's India-born chief executive Arun Sarin vice-chairman.
Vodafone said it would invest $2 billion within two years in the Hutch-Essar mobile telecom venture to tap the rural market, expand infrastructure and improve tele-density.
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