The Pune-based Vickers Systems International Ltd's proposal to issue optionally convertible preference shares to its US parent, Eaton Hydraulics Inc (formerly Vickers Inc), against credit has been rejected by the Foreign Investment Promotion Board (FIPB).
At its last meeting, the board decided to reject the proposal on the recommendations of the department of economic affairs, its administrative ministry, as allotment of preference shares against sundry credit is not permitted under the existing foreign direct investment (FDI) guidelines.
Vickers Systems International had sought government approval to issue 8,08,416 optionally convertible preference shares of Rs 100 each to Eaton Hydraulics against credit amounting to Rs 8.08 crore provided by Eaton.
If the option of conversion were to be exercised by Eaton, the equity stake of Eaton in Vickers System will increase from 51 per cent to 59.78 per cent.
Approval was also sought for change in shareholding of Vickers Systems from Vickers Inc to Eaton Hydraulics Inc as a result of the change in name of Vickers Inc to Eaton Hydraulics. However, since the proposal for issuance of convertible preference shares was rejected, the other proposal for the change of foreign collaborator's name was also nixed in the process.
Vickers manufactures a range of industrial hydraulic products and pumps, packaged systems and cylinders. The joint venture was set up in 1965, sources added.
