The Foreign Investment Promotion Board (FIPB) has rejected a proposal by Mauritius-based Axiata Investments 2 India Ltd, part of Asian telecom giant Axiata Group, to increase its stake in Idea Cellular by acquiring shares from the stock exchange.
Axiata Investments 2 had made a proposal to the FIPB to acquire equity shares by executing trades on the floor of the stock exchange aggregating to one per cent of the company's total issued equity share capital.
The Axiata group currently holds 19.97 per cent in Idea Cellular through various group companies. It sought permission to acquire up to one per cent additional stake through Axiata Investments 2. That would entail buying up to 33,032,725 shares from the market.
However, in August, Axiata Investments 2 India Ltd announced it had acquired 29,776,341 shares, or 0.9 per cent, of Idea Cellular for Rs 306.69 crore (Rs 3.06 billion)at Rs 103 a share from the stock market.
An Idea Cellular spokesperson declined to comment on the issue. The Axiata group spokesperson could not be contacted. With a subscriber base of 101 million, Idea Cellular is the fourth largest cellular
operator in the country.
In the deliberations at the FIPB meeting, the Department of Industrial Policy & Promotion did not support the proposal on the ground that in the FDI policy, acquisition of shares on a recognised stock exchange in the country was allowed only by Sebi-registered FIIs and non-resident Indians.
It was contended Axiata Investment 2 was a foreign corporate and FII entity. Such a transaction is not permitted under the policy and, therefore, cannot be supported even as the total foreign stake in the company in question is below the sector cap of 74 per cent.
Under the rules, only Sebi-registered FIIs and NRIs under the schedule of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, can invest or trade though a registered broker in the capital of Indian companies registered with the stock exchanges.
The department of revenue did not support the proposal on the ground that in spite of repeated opportunities given to the applicant, it failed to submit the requisite information. As a result, the board decided to reject the application.
Axiata, which initially picked up 14 per cent in Idea Cellular, saw its equity stake go up after the Idea Cellular-Spice merger.