New Delhi: The Reserve Bank of India will submit its final report on issues arising from Vodafone Group Plc’s acquisition of a 67% stake in Hutchison Essar Limited today. Following this, the Foreign Investment Promotion Board (FIPB), will meet to decide whether the acquisition violates India’s rules on foreign investment.
Indian laws cap foreign investment in telecom companies at 74%.
The earlier report presented by the bank (ahead of a previous FIPB meeting on 20 March) was an interim one, said an FIPB official who did not wish to be identified. RBI had sought some more information from other quarters, which it has now obtained.
“The bank is expected to give the board its final view either today or sometime tomorrow ahead of the board meeting,” the official told Mint on Wednesday.
Vodafone acquired a 67% stake in Hutchison Essar from parent Hutchison Telecommunications International Limited (HTIL).
The central bank’s report will decide how the FIPB will view the holding of Max India Ltd’s chairman Analjit Singh and Hutchison Essar chief executive officer Asim Ghosh in Hutchison Essar.
The two, together hold a 12.26% stake in HEL (this is part of the 67% stake for which Vodafone bid)
Under the terms of HTIL’s deal with the two, it has an option to buy them out at a pre-decided price.
RBI is investigating allegations that the duo represent HTIL (and now Vodafone) and that their stake must be included while calculating the foreign holding in the firm.
The official confirmed that the individual parties concerned had been invited by the Board tomorrow to make presentations arguing their point of view.
If the stake of Singh and Ghosh is ruled foreign, then the foreign holding in Hutchison Essar will cross the stipulated 74% (52% Vodafone plus 12.26% of Singh and Ghosh plus 22%, which is the Essar group’s holding in Hutchison Essar that is held through foreign entities; the Essar group also holds a 11% stake in the company through Indian firms).
India’s law ministry said the matter had not been referred to it as yet.