FIPB approval last hurdle for Vodafone

Vodafone, which outbid multiple rivals to pick up 67% stake in Hutch-Essar and then managed to placate local partner Essar, faces the last and crucial hurdle on March 20 - that of receiving Foreign Investment Promotion Board (FIPB) clearance.

The approval from FIPB is mandatory for Vodafone, despite the deal to acquire Hong Kong Hutchison Telecom's stake taking place between two non-Indian entities.

The usual impression that the transfer of non-resident to non-resident (in this case, Hutchison to Vodafone) falls under the automatic route and therefore does not require FIPB nod is wrong, as foreign equity over 49% in telecom sector needs FIPB clearance even if no fresh equity is involved, official sources associated with the process said.

If all is found to be in order, the deal may be cleared the same day, they said.

Sources said FIPB would on March 19, go through the communications sent by Department of Telecom (DoT) and Reserve Bank on the deal. DoT is understood to have already given the go-ahead to the transaction.

After moving the application to FIPB on February 22 for acquiring 52% stake in Hutch Essar, Vodafone and Essar representatives met the finance secretary earlier this week and sought an early clearance.

However, FIPB could not take up the case in its March 14 meeting as the application was not listed. FIPB had earlier sought RBI and DoT's comments to look into the shareholding structure of Hutch Essar, after some MPs wrote to the Finance Ministry alleging breach of FDI limit.