Hutch deal clears FIPB test

28 April 2007

New Delhi: After months of dilly dallying, the Foreign Investment Promotion Board (FIPB) has cleared Vodafone''s proposal to acquire 52 per cent in Hutchison-Essar from Hong-Kong-based Hutchison Telecom International Ltd (HTIL).

The proposal has now been sent for the finance minister''s approval. Industry Secretary Ajay Dua said the deal had been cleared without conditions but needed to conform to Press Note 3 of 2007 that requires a company to comply with the 74 per cent limit on FDI in telecom services.

He said the Indian shareholding should also remain Indian and the parties cannot transfer the stake to a foreign entity without government approval. This effectively restricts the sale of a controversial 15 per cent additional stake to Vodafone.

When asked whether FIPB is convinced that the deal complies with the 74 per cent FDI limit, Dua retorted, "That is why the clearance is given". He also said that none of the tax issues raised by the income tax department were discussed.

A Vodafone spokesperson described the news as "clearly welcome," but said the company awaited the finance minister''s decision. The Vodafone scrip rose 0.14 per cent on the London Stock Exchange soon after the news broke.