Telecom service provider Vodafone plc of the U.K. has received approval from the foreign investment promotion board (FIPB) to increase its stake in Indian venture to 100 percent by investing $1.6 billion.
The deal needs final approval from India’s cabinet.
Recently, India allowed foreign companies in the telecommunications sector to raise their holdings to 100 percent from 74 percent in their Indian businesses.
Telenor recently increased its stake in its Indian telecom business to 74 percent by investing around Rs 1,000 crore.
As per the deal, Vodafone is buying Analjit Singh-led Scorpio Beverages’ 24.65 percent stake and Piramal’s 10.97 percent stake to increase the stake to 100 percent.
The valuation of 10.97 percent shares held in Vodafone India by Piramal is Rs 8,900 crore, while valuation of 24.65 percent indirect shares held by Scorpio Beverages is only Rs 1,241 crore, according to media reports earlier. Analjit Singh, who is founder and chairman of Max India, holds about 51 percent stake in Scorpio Beverages.
Vodafone, which entered India in 2007 by buying Hutchison Whampoa’s local cellular assets in an $11 billion deal, directly and indirectly owns a combined 84.5 percent of Vodafone India, the country’s No.2 telecoms company by users and revenue. Its direct holding in the unit is 64.4 percent.
Meanwhile, Vodafone India has been asked to give its final reply by December 31 on the government proposal for a non-binding conciliation to settle the Rs 11,200 crore tax dispute, Finance Minister P Chidambaram said.
Seeking to resolve the long-standing tax dispute with Vodafone, the Cabinet in June had approved non-binding conciliation with the British telecom major.
The outcome of the conciliation, however, needs to be ultimately vetted by Parliament as it would require amendment to the Income-tax Act.
Vodafone has been asked to pay Rs. 11,200 crore as tax on its 2007 acquisition of Hutchison Whampoa’s stake in Hutchison Essar.