FIPB rejects Tatas' plan to bring FDI in investment co

NEW DELHI: The Centre has rejected a proposal by the Tata Sons-promoted Tata Investment Corp (TIC) seeking permission to bring FDI into the company. The rebuff came on grounds that FDI is not permitted in ���investment companies��� and that these entities do not figure in the list of 18 NBFC activities in which foreign investment is allowed.

Investment companies are entities making investment in businesses other than their own. The rejection of this proposal makes it clear that the government will not allow foreign investments in investment companies.

���TIC���s request was considered once again in the last meeting of the Foreign Investment Promotion Board (FIPB) and was rejected as the FDI policy does not allow any such proposals,��� a government official present at the meeting told ET.

The FIPB had rejected TIC���s proposal on the same grounds in the last meeting as well. On its part, a TIC spokesman said the company was yet to receive any communication from FIPB in this regard and hence could not offer any comment.

It is understood that both the finance ministry and RBI had serious objection to approving TIC���s proposal.

TIC had argued that FDI in investment companies should be permitted since these entities are similar to holding companies in which FDI is allowed with special permission from the FIPB. But, the Board held that investment companies cannot be held at par with holding companies as the later is well defined under the FDI guidelines.

TIC, which operates as an investment company and invests in other companies, mutual funds and venture capital funds, is registered with RBI as an investment company.

The firm plans to raise Rs 723 crore through a rights issue in the form of zero-coupon convertible bonds (ZCCBs), including warrants that give shareholders the right to invest in future at specified prices. Tata Sons has 54.98% stake in the company.