Financial Daily from THE HINDU group of publications
Wednesday, Apr 24, 2002
Money & Banking
Corporate - Mergers & Acquisitions
DEA to re-examine Citibank Overseas stake in e-Serve
NEW DELHI, April 23
THE Department of Economic Affairs (DEA) will re-examine the proposal put forward by Citibank Overseas Investment Corporation (COIC) to increase its stake in e-Serve International Ltd through the creeping acquisition route.
The decision to re-examine the entire issue again crops up following a difference in opinion between the DEA and the Secretariat for Industrial Assistance (SIA) on breaching the approved FDI level in the company.
The DEA, in March this year, had recommended rejection of the proposal on the grounds that the company had not provided any information on the clarifications sought by it last year.
The company has approval for 33.65 per cent foreign equity. But with the merger of Citicorp Credit Services India Ltd with e-Serve, following a High Court order, foreign equity in the company reached 34.69 per cent, higher than the approved limit.
However, SIA was of the opinion that since the increase in foreign equity participation was by virtue of the Scheme of Amalgamation approved by the High Courts of Delhi and Mumbai, the proposal, should be examined in the light of Regulation 7(i) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000.
Hence the decision to relook at the whole proposal.
According to the earlier plans, COIC would acquire 12.4 lakh equity shares of e-Serve accounting for 10 per cent of the company's share capital from the secondary market through the creeping acquisition.
The proposal has been tossing around for a long time with the Government seeking various clarifications. In October, the Government had sought clarifications on an Employee Welfare Trust (EWT) formed by the company.
The company had created an EWT despite the Department of Economic Affairs recommending against formation of such trusts by foreign companies.
Later, it submitted a revised proposal stating that it would no longer undertake NBFC activities and would concentrate only on IT-enabled services in the field of loans, securities, trade, cash management and cards processing.
Hence, it returned the NBFC approval to the RBI.
However, e-Serve's share had been hovering at about Rs 625 close to its high of Rs 649.
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