Vodafone gets final FIPB nod, but with riders

The Foreign Investment Promotion Board (FIPB) today issued the letter of approval to Vodafone International Holdings BV for going ahead with its proposal to acquire an effective shareholding of 51.96 per cent in Hutch Essar Ltd from HongKong- based Hutchison Telecom International Ltd.

While doing so, the board imposed four conditions, one of which asked Vodafone, Asim Ghosh, Analjit Singh (and their companies), and IDFC Private Equity Ltd and associate companies to comply with all laws and regulations in India.

These stakeholders will also have to undertake that notwithstanding any agreements they have entered into with any other parties, they will not transfer to any foreign entity, their holdings and interests in Hutch-Essar without the consent of the government.

The consent will be provided only if the transaction complies with the Press Note 3 of 2007, which specifies the guidelines for foreign direct investment in telecom services companies.

In addition, the shareholders will also have to ensure that the shareholding, whether held directly or indirectly or though one or more entities, does not breach the sectoral cap of 74 per cent FDI.

Another condition, with regard to non-competition with an existing joint venture, has also been set.

However, this requirement has already been met as Bharti Infotel (Vodafone has a 10 per cent stake in the group) has already given a no-objection certificate to the proposed acquisition.

The conditions have to be adhered to by four separate entities""Vodafone International, the Asim Ghosh group, the Analjit Singh group, and IDFC Private Equity and associates (IDFC Ltd, SSKI Corporate Finance Pvt Ltd and SMMS Investments Pvt Ltd). Ghosh and his companies hold 4.68 per cent stake in Hutch Essar, while Singh and companies hold 7.58 per cent stake.

The IDFC-SSKI combine owns 2.77 per cent of the company. The remaining 33 per cent shareholding is with the Essar group, which holds 22 per cent of its stake through overseas companies.