Vodafone secures approval to take over India's Hutch Essar

India approved Vodafone Group's bid to acquire a leading Indian phone company, despite criticism that the takeover violated investment rules for the country's telecommunication sector, an Associated Press report said.

According to the Associated Press report, India's Foreign Investment Promotion Board approved Vodafone's all-cash bid for a controlling stake in Hutchison Essar, saying the British company's proposal was compatible with Indian laws that limit foreign equity in any telecom firm to 74%, Industry Secretary Ajay Dua said.

Vodafone's bid values all of Hutchison Essar at $18.8 billion, the report said.

Under the deal, Vodafone will buy a 52% stake in the Indian company from Hong Kong-based Hutchison Telecom International, but also get additional control of another 15% stake held by two individual Indian investors and their associates, who were previously sponsored by Hutchison, the report said.

The report further said the remaining 33% equity is owned by India's Essar Group, of which about 22% is held through a subsidiary registered in Mauritius.

Critics say the deal actually gives control of 89% of equity in Hutchison Essar to foreign firms and amounts to a breach of law.

Dua said the Vodafone proposal doesn't suggest that direct foreign holding will cross 74%, adding that the government has been informed that minority shareholders will not transfer their holdings to any foreign company, the Associated Press report further said.

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