BGL plan to acquire 49% in Bharti Tele rejected

The government is believed to have rejected a proposal of Bharti Global Ltd for acquiring up to 49 per cent stake in Bharti Tele-Ventures, after objections were raised over 'round tripping' and secondary market purchases of shares by overseas corporate bodies.

US-based Bharti Global had sought permission to invest $5 million on repatriation basis by acquisition of existing equity shares from the secondary market 'up to 49 per cent  of the equity capital of Bharti Tele-Ventures,' sources said on Wednesday.

At its February 27 meeting, the Foreign Investment Promotion Board had rejected the proposal after the Department of Economic Affairs voiced its twin objections.

"DEA did not support the proposal on following grounds: Issue of round tripping by Indian companies establishing wholly-owned subsidiaries outside India and reinvesting in India; whether secondary market purchases of shares by OCBs be permitted under FDI," sources said.

While the existing foreign equity component in Bharti Tele-Ventures could not be ascertained, the approved foreign equity is 49 per cent as per the existing cap in the telecom sector.

In its application seeking permission to make the $5 dollar investment, the company says: "Bharti Global's equity participation coupled with their experience and excellent track record backed by global connections would not only provide necessary expertise to globalise the operations of Bharti Tele, but would also provide enormous opportunities for export of its telecom services."

While allowing Bharti Tele-Ventures to set up operations, the government had imposed several special conditions on it.

One of these conditions required the company to obtain prior approval for all downstream investments and that foreign equity holding shall not exceed 49 per cent of the equity capital of the company.

Another condition stipulated that management control of the company must necessarily rest with Indian shareholders.