New Delhi: The Foreign Investment Promotion Board (FIPB), a body under the Union finance ministry, has deferred a decision on approving Vodafone Group’s $11.1 billion (Rs49,000 crore) purchase of a two-third stake in Hutchison Essar from its parent Hutchison International Telecommunications Ltd (HTIL).
The board, which met late on 20 March, has deferred the proposal till its meeting on 29 March, according to an FIPB spokesman. A source close to the development, who did not want to identified, said the approval was deferred over pending clearances from certain government departments.
FIPB has asked the three companies involved in the deal to explain the transaction, PTI reported, quoting unnamed sources.
The department of telecommunications and the Reserve Bank of India, which were asked by FIPB to give their opinions, have raised no objections on the transaction. FIPB had not taken up the matter at its previous meeting last Wednesday too as it did not have the responses from the department. All foreign investment exceeding 49% ownership in businesses such as telecom need clearance by the board.
The Vodafone-HTIL deal has come under scrutiny with allegations that two Indian shareholders—Hutchison Essar chief executive Asim Ghosh and Max India chairman Analjit Singh—are representative-shareholders for Hong Kong-based HTIL, taking the foreign equity in the Mumbai-based phone firm beyond the permitted 74%.
Under the current structure, HTIL owns 52%; Ghosh, Singh and financier Infrastructure Development Finance Corporation together 15%; and Essar group 33% of which 22% is owned through foreign investment units of the conglomerate.