Govt clears Vodafone's stake buy in Essar JV

UK-based telecom operator Vodafone's proposal to buy 5.48 per cent stake in the joint venture, Vodafone Essar, from two Mauritius-based entities, has been cleared by the government.

"Since the transaction is between non-resident (firms) to non-resident, there is no foreign equity inflow," the finance ministry said in a statement. The transaction is worth Rs 2,700 crore.

The deal is for transfer of shares of Vodafone Essar from Mauritius-based Essar Communications and Essar Com Ltd to Euro Pacific Securities, an indirect Mauritius-based subsidiary of Vodafone International Holdings BV.

However, the Foreign Investment Promotion Board (FIPB) has deferred a decision on another request of Vodafone Essar to "transfer of shares from resident (firm) to non-resident (entity) to carry out the activities relating to telecommunication", it said. Vodafone Essar is a joint venture between UK-based Vodafone Group Plc and India's Essar Group.

One of the Mauritius-based indirect subsidiaries of Vodafone had approached the FIPB for permission to buy the stake in Vodafone-Essar. Recently, Vodafone entered into an agreement with its JV partner Essar to acquire 33 per cent stake from it for $5.46 billion (Rs 26,000 crore at on Monday's exchange rate).

According to the FDI norms, proposals involving foreign investment of more than Rs 1,200 crore require the approval of the Cabinet Committee on Economic Affairs (CCEA).

In 2007, Vodafone had bought majority stake of Hong Kong-based Hutchison Telecommunications, former partner of Essar in the joint venture for $11 billion.

Besides approving Vodafone's non-resident to non-resident transfer of shares, the government on Monday cleared 12 proposals for foreign direct investment in the country worth a total Rs 242.88 crore, including one from Indian Rotorcraft to carry out the assembly of both military and civil helicopters.

Honda Siel Cars India's proposal for FDI in a vocational training institute on automobiles and related fields was also cleared.

The board, however, deferred a decision on Bangladesh-based Rahimafrooz Batteries' application to set up a wholly-owned subsidiary to undertake the import and wholesale distribution of batteries and provide services in India. ake buy in Essar JV