FIPB okays Hutch-Essar deal

Foreign Investment Promotion Board is understood to have cleared the proposal from Essar Group on Friday seeking to restructure the equity of telecom joint venture Hutchison Essar Ltd, which takes the foreign shareholding to the permissible limit of 74 per cent.

Official sources said the proposal of Essar, which was seeking to increase its equity held through foreign subsidiaries by 6.26 per cent to 22.04 per cent has been approved.

With this, the foreign equity in the Hutchison Essar JV has touched the limit of 74 per cent. In the JV, while Hutch holds 52 per cent, Essar has 22 per cent foreign equity taking the total to 74 per cent. In the overall JV, Essar has 33 per cent stake.

Earlier, the total foreign holding (direct and indirect) in HEL was around 68 per cent.

FIPB also took on record the direct and indirect foreign investment in Spice

Telecom, which operates in Punjab and a few other circles. Telecom Malaysia holds 49 per cent equity in this Modi group company.

The entire 22.04 per cent of foreign equity component within Essar's 33.01 per cent is being proposed to be routed through Essar Communications, a Mauritius-based offshore holding company of the Essar Group.

In such a scenario, HEL's principal foreign shareholder, Hutchison Telecoms International of Hong Kong, will hold 51.98 pc, while Essar group's foreign holding will be 22.02%. Currently, Essar officially holds a 33.01% stake in Hutch-Essar.

Out of this, 27.21% is held through Essar TeleHoldings-Vilsat Investments (21.02%) and Essar-Mauritius Investors (6.19%).

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