Govt clears Vodafone's stake buy in JV with Essar

The plea of UK-based telecom operator Vodafone to buy 5.48% stake in the joint venture - Vodafone-Essar - from two Mauritius based entities has been approved, the government said today.

"Since the transaction is between non-resident (firms) to non-resident, there is no foreign equity inflow," the finance ministry said in a statement.

The transaction is for transfer of shares of Vodafone Essar from Mauritius based Essar Communications and Essar Com Ltd to Euro Pacific Securities -- an indirect Mauritius based subsidiary of Vodafone International Holdings BV.

The transaction worth about Rs 2,700 crore.

The FIPB cleared the transaction based on information provided by the company and inputs from a committee headed by a senior government official, the statement said.

However, the Foreign Investment Promotion Board (FIPB) has deferred decision on another request of Vodafone-Essar to "transfer of shares from resident (firm) to non-resident (entity) to carry out the activities relating to
telecommunication", it added.

Vodafone-Essar is joint venture between UK-based Vodafone Group Plc and India's Essar Group.

One of the Mauritius based indirect subsidiaries of Vodafone had approached the FIPB for permission to buy the stake in Vodafone-Essar.

As per the FDI norms, proposals involving foreign investment of more than Rs 1,200 crore require the approval of the CCEA.

Recently, Vodafone entered into an agreement with its JV partner Essar to acquire 33% stake from it for USD 5.46 billion.

Before that, in 2007, Vodafone had bought majority stake of Hong Kong-based Hutchison Telecommunications - former partner of Essar in the JV - for about USD 11 billion.