Financial Daily from THE HINDU group of publications
Tuesday, Jul 27, 2004
Regulatory Bodies & Rulings
Info-Tech - Telecommunications
Industry & Economy - Foreign Direct Investment
DoT raises doubts over Hutch Max FDI limit
Thomas K. Thomas
New Delhi , July 26
WITHIN just a few weeks of the Finance Minister, Mr P. Chidambaram, highlighting the "non-transparent" nature of foreign direct investment (FDI) in Indian telecom companies, the investment promotion cell of the Department of Telecommunications (DoT) has expressed concern that FDI in Hutchison Max Telecom Ltd (HMTL) could have exceeded the permissible limit.
The equity structure of the six Indian investors in the mobile services company is not known.
The issue was taken up by DoT on July 19 when it discussed Hutchison Max's proposal seeking approval for restructuring of its foreign equity holding.
However, no decision was taken since the proposal given by Hutchison Max did not explain the foreign equity holding in the six Indian companies, DoT officials said.
DoT's observations assume significance in the light of Mr Chidambaram's move to raise FDI cap in telecom to 74 per cent.
The Finance Minister had said that raising the FDI cap would allow companies to simplify equity holding without having to resort to complex multi-layered structure in order to keep the investments ostensibly within 49 per cent.
Sources in HMTL said that the company had provided all the details to DoT and got the necessary approvals from Foreign Investment Promotion Board (FIPB) for equity restructuring.
They said that the company had not received any intimation from DoT seeking clarification on the foreign equity structure.
As per HMTL's proposal, FDI after restructuring would be 48.52 per cent. There are, however, six Indian investment companies who would be holding the remaining equity of the company.
They are Essar Teleholdings, Usha Martin Telematics, Telecom Investment India, Indusind Telecom and Max Televentures.
"Equity structure of these six investment has not been provided in HMTL's proposal. FDI and management control in these companies has to be according to FDI policy for investment companies. There are possibilities of the FDI limits being exceeded without the knowledge of the Government," senior DoT sources said.
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