Vodafone has been allowed to increase its stake in its Indian unit to 100 per cent from 64 per cent after India's Foreign Investment Promotion Board approved the move.
In October, the operator filed for regulatory approval to fully acquire its Indian unit in a deal worth 101.41 billion rupees ($1.64 billion or €1.18 billion) to take advantage of new direct foreign investment rules in the country. Economic Affairs Secretary Arvind Mayaram has now confirmed that the deal can go ahead, according to the Wall Street Journal, although Vodafone will still need final approval from the federal cabinet before it can buy out its Indian partners.
It was also reported in October that Vodafone plans to invest as much as $2 billion (€1.45 billion) in the country. Vodafone indirectly owns a combined 84.5 per cent in the India unit. Billionaire industrialist Ajay Piramal owns an 11 per cent stake.
Until recently, foreign companies were permitted to own up to 74 per cent of Indian companies, but India has now liberalised the rules in different sectors including telecoms to allow up to 100 per cent ownership in a bid to attract foreign investment.
Vodafone's move comes in spite of a rather patchy relationship with the Indian government since it acquired its stake in Hutchison Essar in 2007 for almost $11 billion.
The Indian Business Standard newspaper said Vodafone had been asked to reply by Dec. 31 on the government proposal for a non-binding conciliation to settle a tax dispute of around $1.8 billion or (€1.3 billion) dispute relating to the Hutchison Essar deal.
In addition to this, Reuters reported that Vodafone received a separate final tax demand of around $604 million in a so-called transfer pricing dispute linked to its Pune-based outsourcing unit. The Business Standard said the Income Tax Appellate tribunal had since stayed this demand.
For more:
- see this WSJ article (sub. req.)
- see this moneycontrol.com article
- see this Business Standard article
- see this second Business Standard article
- see this third Business Standard article
- see this Reuters article
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