New Delhi: Will the third time be a charm?
The Foreign Investment Promotion Board (FIPB) has again recommended that Blackstone Group’s Rs 590 crore proposal to invest in Ushodaya Enterprises Ltd, publisher of the largest selling Telugu daily Eenadu, be approved by the finance minister.
The scaled down foreign direct investment deal now awaits a final nod from finance minister P. Chidambaram, though a Congress member of Parliament, who has fought the original deal, again told Mint on Tuesday that he will oppose any approval, this time by filing a lawsuit.
Almost a year ago, Blackstone had proposed to invest $275 million, or about Rs1,080 crore, in Ushodaya, for a 26% stake. But, amid political and other pressures, that deal was not cleared by the finance ministry despite having necessary approvals from all other government ministries and departments that need to sign off on such deals, including two all-clear recommendations from FIPB.
Trying to salvage any deal, Blackstone scaled back the proposal to about half the original size so that it wouldn’t have to get approvals beyond the finance ministry.
Investment proposals with a value exceeding Rs600 crore need to be approved by the finance minister as well as the Cabinet Committee on Economic Affairs.
Senior government officials who did not wish to be identified, but are close to the developments, confirmed on Tuesday that the new investment will be for less than Rs600 crore and was indeed cleared at a special meeting convened by FIPB, a committee of senior bureaucrats that oversees foreign direct investment proposals.
Mint had reported on 7 January the tortured saga of Blackstone’s investment, the largest foreign direct investment in an Indian media company, and it had been stuck for 10 months against the backdrop of a rivalry between the Y.S. Rajasekhara Reddy-led Congress government in Andhra Pradesh and Ramoji Rao, a media baron who controls Ushodaya.
Aruna Kumar Vundavalli, the Congress member of Parliament from Rajahmundry, Andhra Pradesh, led the campaign against Blackstone by writing letters to FIPB asking it to reject Blackstone’s proposed investment because of unrelated issues involving Margadarsi Financiers, which is also owned by Rao and his family.
As Mint also reported on 9 January, Rao and his family had proposed to repay depositors of Margadarsi Financiers by selling intangible and tangible assets to Ushodaya, including a film library, valued by Ernst and Young at Rs770 crore; printing presses from another Rao company; and agreeing to a non-compete with Ushodaya. In turn, Ushodaya, acting as a separate legal entity, was to use the proceeds from Blackstone to pay Rao and his family.
“Let the government approve the deal, it will have to face the music,” Vundavalli told Mint on Tuesday.
“I will RTI (Right to Information) all information and find out why Blackstone is so keen to invest in Ushodaya,” he claimed. “Then we will come to know whose money it is actually. I have been saying all along that this deal is a fraud because Ramoji Rao has himself stated in a court affidavit that his HUF (Hindu Undivided Family) that collected money against the rules and couldn’t pay back its depositors owns a majority of Ushodaya shares. Why should the government permit FDI in a fraud company? I won’t stop simply because Blackstone scales down its investment. I will take the matter to the court.”
Rao couldn’t immediately be reached for comment.