Essar group asks govt to clarify on equity shifts

The Essar group has asked the government to clarify whether any indirect or direct equity changes in a telecom service licence holder in the country need approvals or clearances from relevant authorities.

In a letter to Prime Minister's Principal Secretary TKA Nair and Department of Telecom Secretary JS Sarma, Essar raised the issue of last year's equity changes in its Indian mobile service joint venture, Hutchison Essar, with Hong Kong based Hutchison Telecom International Ltd (HTIL).

The trigger for the letters is an overseas deal that happened last year when Egyptian telecom company Orascom got an indirect entry into Hutchison Essar as a result of its acquisition of a 19.3 per cent stake in HTIL.

Under this deal, Orascom has got board representation in HTIL's operating subsidiaries, including Hutch Essar. It also gained a 12.19 per cent effective holding in Hutch Essar.

Sources close to the development told Business Standard that Essar had sought directions from the government, asking "whether any such indirect share-holding transfers require clarification or government approvals". When contacted, Essar executives refused to give details.

But sources said the letters were written because of the 74 per cent foreign direct investment guidelines which clubbed both direct and indirect foreign holdings under one head.

Approval of the Foreign Investment Promotion Board is not required till FDI touches 49 per cent. Beyond this limit, till 74 per cent, FIPB's approval is required.

The DoT is believed to have not responded to the letters at this stage.

In any case, with the deadline for the implementation of the 74 per cent FDI norms being extended to July 4, the issues will now be part of the agenda before a committee of secretaries set up to look into the matter.