The core group of the Foreign Investment Promotion Board (FIPB) yesterday deferred a decision on open offers of Canadian major Alcan and Sterlite Industries for Indal shares.
It also deferred a decision on Zurich Insurances proposal to set up a 100 per cent subsidiary in India and discussed the general functioning of the FIPB. The core group comprises the secretaries of finance, industry and commerce ministries.
The core group, which met here yesterday, discussed various issues related to the Alcan proposal. One of the issues included the role of the FIs in the Indal drama.
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The FIs, including the UTI and LIC which hold between them 38 per cent of Indal equity stake, had opined that they would like to hold on to their stakes if the Indal management can assure better returns. Still, they had also made it known that they are not averse to offloading their 38 per cent stake in Indal to the highest bidder who will given them a good price for their shares.
Alcan had sought government permission to hike its stake in Indal from about 34 per cent to 54 per cent in a bid to stop Sterlite from a takeover of Indal and had attached a board resolution from Indal backing the move. The FIPB, which took up Alcans proposal last month, had referred the case to the core group as the issue needed to be discussed in more detail, sources had said.
Sterlite Industries had sought to pick up 20 per cent equity stake in Indal. Government sources had said that the case had to be referred to the core group as Sterlite Industries had written to the industry ministry objecting to Alcan hiking its stake in Indal by acquiring shares from the secondary market.
In its letter to the industry ministry, Sterlite is believed to have pointed out that Alcan cannot hike its stake in Indal by acquiring shares from the secondary market as this route can be accessed by FIIs and NRIs only.
Both Sterlite and Alcans had made open offers for Indal shares. Sterlites last offer being Rs 115 per Indal share. Sterlite had initiated the takeover drama by offering Rs 90 per Indal share in February this year, which was followed by Alcans Rs 105 per Indal share in March. Alcan had stated it may revise its offer upwards by Rs 15 to Rs 120.
Sterlite Industries recently has secured bank guarantees worth Rs 110 crore from bank of Nova Scotia, BNP and ABN Amro Bank and term deposit of Rs 25 crore from bank of Nova Scotia to meet to meet the financial requirement for participating in its open offer for 20 per cent stake in Indal. The bank guarantees and term deposit were in favour of Emam Financial, the merchant banker to Sterlites open offer and are, reportedly, valid for 90 days.
The proposal of Zurich Insurance, in the backburner for quite sometime, was recently brought out of the cans by the FIPB and then referred to the core group. The proposal envisages setting up a 100 per cent subsidiary to dabble in the insurance sector and other related activities.
The insurance majors proposal is important in the sense that even the present BJP-led coalition government had hinted that a fresh insurance policy may pave the way for the entry of foreign players in this sector.