Why Essar wants to route investment as Foreign Investor ?
The Ruias managed Essar group already holds 33% stake in Hutchison Essar, while Hutchison Whampoa holds 52%. Essar currently holds 6.19% through Essar Mauritius. This evening Essar got an approval from the FIPB to increase its stake by means of foreign holdings from 6.19% to 22% which will take FDI in the joint venture to the ceiling of 74% as prescribed by the Government of India.
But why does Essar want to be an FI ? I can think of two reasons, Mauritius based companies get some kind of tax benefit and the other reason could be the growing rift between the two promoters has prompted Essar to block further growth of Hutch in the joint venture. Hopefully, both the partners will come on an amicable platform before Hutch CEO, Asim Gosh quits and moves to green pasture, Reliance Telecom which is aggressively expanding in the GSM segment.
Tags: Telecom India , Mobile India , Hutch , Essar Tele
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[...] Essar group obtains permission from the FIPB to increase stake in the venture as a Foreign Investor – Smartest Move. Essar kills two birds at a time - Checks growth of other foreign investors in the venture and is probably taking tax shelter routing investment through Mauritius. [...]
[...] Essar may have to shed some stake or Vodafone India must go for an IPO in India because Essar group currently holds 21% stake in Hutch Essar through an overseas company. Also Vodafone has to dump its 10% stake in Bharti-Airtel Ltd and pay a fine to get past the Non-Compete clause they signed with Mr. Sunil Mittal. [...]