Hutch FDI gets past Orascom hurdle

Category: Vodafone | No Comments | Posted on July 18, 2006

The Foreign Investment Promotion Board (FIPB) has cleared Hutch Essar’s proposal to raise FDI from 49% to 68%, notwithstanding the strong opposition from National Security Advisor MK Narayanan and the company’s Indian partner, Essar.

The foreign investment includes the contentious 10% indirect shareholding of Egypt-based Orascom, which it holds by virtue of its 19.3% equity in Hutch International.

National Security Advisor had objected to the deal saying that Orascom’s acquisition of equity in HTIL was a threat to national security as it was a dominant player in Pakistan and Bangladesh.

The board’s decision shows that the institutional decision-making process is capable of insulating itself from unreasonable insecurities on the national security front. This is likely to give comfort to potential commercial partners in countries such as Egypt, where questions against Orascom had raised hackles.

This is also a cause of dispute between Essar and Hutch.

Essar says that it was not taken into confidence when Hutch sold equity in HTIL to Orascom. In a letter to the telcom department it had sought clarification on whether entry of a strategic partner (Orascom) at the foreign holding company level (HTIL), required prior DoT approval, especially if such shareholding change in the holding company triggers changes in the indirect shareholding of Hutch Essar.

The FIPB clearance includes Hutchison Telecommunication (India)’s acquisition of an additional 5.11% stake in the unlisted Indian cellular JV of Hutchison Essar for $450m from Hinduja TMT.

Source: ET

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