Hughes accepts government policy, reduces stake in Indian JV
23 Aug 1999
Hughes Network Systems, representing Hughes Electronics Corporation in the joint venture Hughes Escorts Communications, will sell two per cent of its equity in the company to IndOcean Chase Capital Advisers, a Mumbai-based firm. The US company will thus accede to the Indian government's policy of allowing a maximum cap of 49 per cent equity to foreign firms in telecommunication joint ventures in India. Hughes Network Systems' will now have a 49 per cent stake in the joint venture, similar to that of the Indian partner, Escorts.
Hughes Escort Communications has paid-up capital of Rs 7.65 crore.
The joint venture had been in a limbo ever since the Foreign Investments Promotion Board rejected its application in 1996. Hughes apparently wanted to have direct control in the project, and it has had disagreements with the government since 1996.
The FIPB did not clear the project proposal on an objection raised by the department of telecommunications on the ground that the foreign ownership in the company exceeded the permissible limit. Hughes then proposed dilution of the excess stake in favour of a group subsidiary, HNS India, but the government did not accept this proposal.
With the proposal pending before the FIPB for nearly two years, DoT sent an objection note saying the application should be rejected on account of the purported "over-arching of sectoral guidelines", and FIPB rejected the proposal.
IndOcean Chase Capital Advisers is a partnership firm. It will acquire three lakh shares from Hughes Network. The financial consideration is not made public.
The company proposes to manufacture, market, install,operate and maintain V-SAT equipment and services in India. It has secured a major order from the DoT for a V-SAT shared hub service (closed users group domestic 64 kbps data network via the Insat satellite).
