Japan Tobacco raises investment in Indian unit

The world’s third largest tobacco company by sales volume, Japan Tobacco Inc, has invested $65 million (Rs 293 crore) in its Indian unit without increasing its shareholding, just days ahead of a government decision to ban foreign direct investment (FDI) in cigarette manufacturing.

Japan Tobacco holds 50 per cent equity in JTI India, a joint venture with a Mumbai-based law firm, the Thakkar family. The company manufactures several popular cigarette brands, such as Benson & Hedges and Camel, and other tobacco products like cigars.

Japan Tobacco had been wanting to infuse fresh capital in the Indian unit for some time. The company had earlier sought permission of the Foreign Investment Promotion Board (FIPB) to increase its stake in the Indian venture from 50 per cent to 74 per cent. FIPB, however, put the proposal in "abeyance", where it has remained for more than a year.

JTI India, sources said, has issued fresh equity of Re 1 each to the Japanese company at a premium Rs 298, amounting to Rs 293 crore. It has issued an equal number of shares to its Indian partners, the Thakkar family, which paid only Rs 1 crore for the shares, as they were issued at par.

By issuing the shares on a differential basis, the company has ensured infusion of more capital from the foreign partners without any increase in their shareholding.