FIPB puts on hold Chyrs Cap plan to pick stake in DCB

Private equity firm Chrys Cap Mauritius' proposal to acquire a 12.89 per cent stake in Development Credit Bank (DCB) has been deferred by the Foreign Investment Promotion Board (FIPB).

The board deferred the case on the grounds that the due diligence process required references to various regulatory and enforcement agencies in India and abroad, and the RBI's recommendations on the acquisition of stake would depend on the receipt of information from these agencies, which may take time.

The representatives of the commerce ministry and the Department of Industrial policy and promotion at a recent meeting decided to keep Chrys Cap's proposal on hold since the due diligence process is a lengthy one. FIPB also said that it would wait for fresh RBI guidelines in this regard.

In its application, Chrys Cap Mauritius had said that it proposed to buy 12.89 per cent equity stake in DCB at a premium of Rs 45 per cent a share for an aggregate consideration not exceeding $8 million.

DCB has an existing non-resident Indian and overseas commercial borrowing equity of 49 per cent held by the Aga Khan Fund for Economic Development. As of March 31, 2004 the bank had a network of 70 branches with a deposit base of Rs 4,474 crores and the advances were over Rs 2,439 crores.

Chrys Cap Mauritius had also furnished a no-objection certificate from Yes Bank Ltd under Press Note 1 of 2005 as it is an investor in the bank. In a letter sent to FIPB in August last year, RBI the matter regarding the due diligence of the proposal was being carried out by the Department of banking Regulations and Development.

The department had sought a deferment of the proposal as the due diligence on the foreign investor was taking time.

It added that according to the Exchange of information article of the Indo-Mauritius double taxation Avoidance Agreement, a request can be made to the Mauritius tax authorities only if there was a taxation matter involved with any Mauritius-based company.

Moreover, the desired information does not come under the purview of the Indo-Mauritius agreement.