The Foreign Investment Promotion Board (FIPB) has rejected Axiata Investments 2 India Limited?s proposal to increase its stake in Idea Cellular by acquiring shares from the stock exchange.
The company had asked the FIPB if it could acquire equity shares by executing trades on the floor of the stock exchange aggregating to one per cent of the company’s total issued equity share capital.
The Axiata group currently holds 19.97 per cent in Idea Cellular through various group companies. It sought permission to acquire up to one per cent additional stake through Axiata Investments 2. That would entail buying up to 33,032,725 shares from the market.
In August 2011, Axiata had announced that it had acquired 29,776,341 shares, or 0.9 per cent, of Idea Cellular for Rs 3.06 billion at Rs 103 a share from the stock market.
It is believed that the FIPB rejected the proposal on grounds that as per the FDI policy, acquisition of shares on a recognised stock exchange in the country was allowed only by FIIs registered by the Security and Exchange Board of India and non-resident Indians.
It was contended that Axiata Investment 2 was a foreign corporate and FII entity. Such a transaction is not permitted under the policy and, therefore, cannot be supported even as the total foreign stake in the company in question is below the sector cap of 74 per cent.
