As 2013 nears its end, the Government has put its foot hard on the accelerator and is giving quick clearances to all pending proposals of foreign investments. Determined to narrow country’s current account deficit and improve the foreign investor sentiment towards Indian markets, the Government has expedited the process of giving global players necessary approvals to enter and invest in the country. The fast track focus of the Government was evident after the Foreign Investment Promotion Board (FIPB) gave a nod to Vodafone’s plan to buy out minority stake in its Indian arm and Tesco’s proposal to enter the country’s multi brand retail sector.
Showing Government’s seriousness towards overseas investors, FIPB on Monday approved Vodafone’s Rs10,141 crore plan to buy out minority shareholders in its Indian subsidiary. Along with that, FIPB also gave a nod to UK- based Tesco Plc’s proposal to enter the Indian multi-brand retail segment in joint venture with Tata Group company with an initial investment of $110 million or about Rs680 crore.
The telecom major, currently holds 64.38 per cent stake in Vodafone India and had approached FIPB to allow it to buy the remaining outstanding shares from minority shareholders like Ajay Piramal and Analjit Singh. Piramal holds 10.97 per cent stake in Vodafone India while Singh, who is Vodafone India’s non-executive chairman, holds 24.65 per cent. Vodafone Group Plc will pay Analjit Singh Rs1,241 crore and Piramal Enterprises Rs8,900 crore for their stakes in Vodafone India as part of a proposal.
For Vodafone, FIPB clearance is just the first step towards getting a complete clearance. Since the deal size is above Rs1,200 crore, the company’s proposal also requires clearance from the Cabinet Committee on Economic Affairs (CCEA). Responding to an e-mail query from The Pioneer, Ben Padovan, Group Head (Media), Vodafone Group Services limited said, “We are pleased to have obtained FIPB approval to increase our stake in Vodafone India. The Cabinet Committee on Economic Affairs still has to endorse this decision before either transaction can take place.”
As the second biggest decision towards boosting foreign investment, FIPB also cleared UK- based Tesco Plc’s proposal to enter the Indian multi-brand retail segment in joint venture with Tata Group company with an initial investment of $110 million or about Rs680 crore.
After FIPB’s approval, Tesco would now be able to pick up a 50 per cent stake in Trent Hypermarket ltd, a wholly-owned subsidiary of Trent ltd, a Tata group company. Tesco is the first global retailer to apply for multi- brand retailing after the Government allowed 51 per cent FDI in the segment in September last year. Trent Hypermarket runs 16 outlets in the southern and western regions with support from Tesco.
The UK retailer plans to sell 14 categories of products including tea, coffee, vegetables, fruits, meat, fish, dairy products, wine, liquor, textiles, footwear, furniture, electronics and jewellery. Commenting to the approval, Tesco spokesperson said, “Tesco is pleased that the FIPB has agreed to our proposal. This will now allow us to work on the practicalities of setting up the Joint Venture with Trent. Any such announcement will be made in the usual way.”
Earlier, on December 26, CCEA had approved Axis Bank’s proposal to raise the foreign investment limit in the bank to 62 per cent from 49 per cent thus rustling in attracting foreign investments worth Rs7,250 crore in the country.
Just like Axis bank, HDFC Bank had also approached FIPB to raise the limit of foreign institutional investor (FII) holding in the bank. But FIPB in its meeting deferred the decision on bank’s proposal of increasing FII holding limit. Currently, FIIs hold 50.63 per cent in the bank including American depository receipts and global depository receipts.
With the tenure of the Government also coming to its end, this new fast track approach towards giving approvals would help improve the country’s standing on the global front and also help in quick economic recovery.
Talking about economic revival, Confederation of Indian Industry’s (CII) Director General Chandrajit Banerjee said, “With positive signals emanating from the global economy, which finds a resonance in our improved export performance and is causing our current account deficit (CAD) to decline, we believe that the slowdown in the domestic economy may have bottomed out in the second quarter and the trend could reverse henceforth.”
It is due to such strong and swift moves, CII Business Confidence Index (BCI) surged sharply to 54.9 during October- December period. This sharp rise in BCI indicates that the country’s economy has started to recover and with Government backing this recovery with speedy decision making, the future looks much brighter.