Government clears proposal on a promoter's equity in IndiGo

To now be termed NRI instead of FDI, allowing more of latter under the cap

A proposal  of air carrier IndiGo’s holding company, InterGlobe Aviation, to reclassify the equity stake held by promoter Rakesh Gangwal through Caelum Investments, has been approved.

With this, the company can have access to fresh foreign direct investment (FDI). A senior official in the ministry of finance confirmed the proposal to reclassify his shareholding as that of a non-resident Indian (NRI) was approved on Friday by the Foreign Investment Promotion Board.

Gangwal’s stake is presently classified as FDI, though a clutch of NRIs hold majority stake in Caelum Investments. In the FDI guidelines, foreign companies and foreign airlines are allowed up to 49 per cent stake in an Indian airline. While, NRIs are permitted to hold up to 100 per cent stake in an Indian carrier. InterGlobe’s application had said reclassification of Gangwal’s stake would enable a space space in the FDI limit to be filled, allowing fresh induction of foreign investment, as required.

At present, Gangwal, through Caelum Investments (incorporated in Delaware, US) holds 47.88 per cent stake in InterGlobe Aviation. Rahul Bhatia owns the rest.

Gangwal owns 40 per cent stake in Caelum and his wife, Shobha Gangwal, has 20 per cent. The remaining shares are held by The Chinkerpoo Family Trust.

In the proposal put up, Caelum would be merged into InterGlobe Aviation. The 147,000 equity shares held by Caelum in InterGlobe would be cancelled. In a cashless transaction, InterGlobe would issue 147,000 equity shares having a face value of Rs 1,000 each to non-resident members of Caelum. The shares will be allotted in proportion to the voting units held by such members in Caelum.

The overall NRI holding in InterGlobe will not increase. However, after the merger, a part of the shareholding will be held by NRIs. The scheme has been sanctioned by the high court here.

The FIPB permission was sought because in accordance with provisions in the Foreign Exchange Management Regulations, issue of shares to NRIs are permitted upon merger of two Indian companies, subject to certain conditions.

Since the said proposal involves the merger of a non-resident company into an Indian one, FIPB approval is required for issuing equity shares to NRIs after the merger.

The board of InterGlobe had approved the transaction in May this year.