The government has deferred a decision clearing the buyout of the two-third stake held by Hutchison Telecommunications International Ltd (HTIL) in India’s fourth-largest mobile phone services company Hutchison Essar Ltd by Vodafone Group, the world’s biggest cellular phone firm by revenues.
Instead, it sought more information on the loan agreements and the nature of the guarantees between HTIL and two shareholders of Hutchison Essar, Asim Ghosh, chief executive of Hutchison Essar, and Analjit Singh, chairman of Max India. Between them, they control 12.26% equity.
The Foreign Investment Promotion Board (FIPB), the nodal body for clearing foreign investments that require prior government approval, will take a final view on whether the stake held by Ghosh and Singh is foreign—thereby taking the foreign ownership in the phone firm beyond the permitted 74%—after this information is furnished.
A core committee meeting of FIPB attended by finance secretary Ashok Jha, industry secretary Ajay Dua and commerce secretary G.K. Pillai made the decision. “The two companies are expected to give this information within the next three-four days after which FIPB will hold its next meeting,” a top government official who attended the meeting said, requesting anonymity.
He said the Reserve Bank of India was also yet to give its final view while the opinion of the law ministry was awaited. Asked if the income tax department also had a stance on the issue, he said, “there is no income tax angle”.
Executives representing Vodafone, Hutchison Essar, HTIL and Singh presented their views before FIPB.
The government is investigating if Ghosh and Singh are proxy shareholders for HTIL and if their stake must be counted as foreign.
If their stake are ruled as foreign, then the foreign holding in Hutchison Essar will cross 74%, including 52% owned by HTIL, 12.26% of Singh and Ghosh, and 22% held by local partner Essar Group’s foreign entities.