Govt defers decision on Vodafone’s FDI plea

Govt defers decision on Vodafone’s FDI plea

New Delhi: A Government panel Wednesday deferred decision on UK-based Vodafone’s plea to buy 5.48% stake in telecom company Vodafone-Essar for about 2,700 crore for want of comments from home and telecom ministries.

“No decision was taken today. The matter may come up again in the next meeting of the Foreign Investment Promotion Baord (FIPB)," a senior finance ministry official said.

Mauritius based Prime Metals, an indirect subsidiary of Vodafone International, had moved an application before the FIPB for permission to buy about 5.48% stake in the Vodafone-Essar.

The home ministry and telecom ministry are yet to make any comment on Prime Metals plea, he added.

Prime Metals already holds about 1.53% stake in Vodafone-Essar.

If the deal materialises, foreign stake in the Vodafone-Essar will increase to over 69% from the present about 64.38 per cent.

Since foreign stake in the Vodafone-Essar is more than 49%, FIPB permission is must for the Mauritius firm to buy the stake in the joint venture company.

“Even after the clearance of FIPB, the deal must be cleared by the Cabinet Committee on Economic Affairs (CCEA)," the official added.

As per the FDI norms, proposals involving foreign investment of more than 1,200 crore require the approval of the CCEA.

It may be recalled Vodafone had agreed to pay $5.46 billion to buy the 33% stake from its Indian partner Essar. As part of the deal, Essar agreed to exercise its right to sell 22% stake to Vodafone while the British telecom major on its part exercised its right to buy further 11% stake held by Essar.

The Indian conglomerate held 22% stake in Vodafone-Essar through Mauritius-based Euro Pacific Securities Ltd and the other 11% through Indian-registered Essar Telecommunications Holdings.

Vodafone had already paid $1.9 billion to Essar for the first tranche of shares equivalent to an 11% stake held by Euro Pacific Securities.