SSTL likely to re-apply to FIBP for higher foreign ownership

Sistema Shyam TeleServices Limited (SSTL) is planning to re-apply to the Foreign Investment Promotion Board (FIPB) for increasing the foreign ownership in the company beyond 74 per cent. At present, Russia-based telecom company Sistema JSFC and the Russian government collectively hold 73.80 per cent while Shyam Group holds around 23.98 per cent stake in SSTL.

Earlier in October 2014, SSTL had sought FIPB?s approval for an increase in foreign shareholding in the company. However, the request was declined by FIPB on the grounds of ambiguity in the mode of investment by the foreign stakeholders as proposed by SSTL.

In this regard, the Department of Telecommunications (DoT) has been of the view that the proposal would need an approval from the Reserve Bank of India, and not DoT, as the proposal had been structured like an overseas debt deal and not foreign direct investment (FDI). According to the telecom department, SSTL had proposed the use of redeemable preference shares and optionally convertible redeemable preference shares to increase the foreign stake. However, these instruments do not qualify as FDI and are external commercial borrowings, which require the approval of RBI.

Working on these lines, SSTL is currently preparing a response on the various observations made by the FIPB, and will shortly ask FIPB  to reconsider the operator?s proposal.