BackDecision on Vodafone deal likely on Friday: Official
Decision on Vodafone deal likely on Friday: Official
Premium
AFP
New Delhi: India’s foreign investment body is expected to decide Friday whether to clear Vodafone’s $11.1 billion plan to buy mobile phone operator Hutchison Essar, a government official said.
The decision has been delayed three times by the government as it scrutinises whether Vodafone’s deal to purchase India’s fourth-largest mobile company Hutchison Essar conforms with foreign investment rules.
The Foreign Investment Promotion Board (FIPB) “is likely to take a decision tomorrow," Ajay Dua, secretary of the department of industrial policy, told reporters in the Indian capital.
Dua had said earlier this week that “we are optimistic" the deal would be declared compliant with rules that allow foreign ownership of up to 74% in a domestic telecom firm
Britain’s Vodafone Group Plc agreed in February to buy Hong Kong-based Hutchison Telecommunications International Ltd’s (HTIL) 67% controlling interest in Hutchison Essar.
Vodafone, the world’s biggest mobile phone company, has said it is directly buying 52% of Hutchison Essar while options would give it another 15%.
HTIL holds 52% of Hutchison Essar directly and has an “economic interest" in another 15% held by Asim Ghosh, Hutchison Essar managing director, and Analjit Singh, chairman of health care group Max India.
The balance of 33% is held by Indian steel-to-shipping conglomerate Essar but two-thirds of its stake is in turn, controlled through an offshore company for tax reasons, classifying it as foreign.
The Indian media has reported Hutchison Telecom stood guarantor for loans to Ghosh and Singh. If India decides this reported arrangement made the minority stakes foreign owned, the 74% limit in Hutchison Essar would be breached. Both Singh and Ghosh say they are not a front for HTIL.
The purchase is central to Vodafone’s strategy of seeking new markets away from the now saturated developed countries.
Word of the impending decision came as an Indian newspaper reported that tax authorities had proposed that HTIL pay up to two billion dollars in capital gains on the sale of its 52% stake in Hutchison Essar to Vodafone before the deal is cleared.
Quoting unnamed sources, the Business Standard said the foreign investment body was not obliged to follow the tax authorities’ idea but added that tax officials could pursue HTIL even after the deal went through.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
