Deal will need FIPB blessings, RBI clearance to go through

NEW DELHI: The $23-billion cash-and-share deal between Bharti Airtel and South Africa���s MTN group will need the approval of the foreign investment promotion board (FIPB), in the absence of a policy on share swaps, a government official said, requesting anonymity. FIPB comprises secretaries in the economic ministries and departments, and clears foreign investment proposals where policies are ambiguous.

In a complex deal, India���s largest mobile phone operator will acquire 49% equity stake in MTN group, while MTN shareholders will get about 36% stake in Bharti. The two companies have agreed to negotiate the potential deal by July 31.

The deal is technically feasible as, in the past, FIPB had approved such share-swaps involving foreign companies, said a finance ministry official, who asked not to be named. However, the approval will be subject to independent valuation of shares and a clearance by banking regulator Reserve Bank of India, he added.




The current FDI policy allows cashless issue of shares through instruments such as warrants after FIPB approval. While the policy does not explicitly mention that foreign firms need FIPB approval if the deal involves share swap, the Foreign Exchange Management Act says such deals need RBI approval.

ET had reported on March 5 that the government plans to allow Indian companies enter share-swap deals with foreign firms to facilitate mergers and acquisitions that have been affected by a severe credit crunch. The shares offered in such cashless exchanges could also belong to a group company that is not party to the deal, the report had said. Pricing norms for such transactions will be framed by capital market regulator Sebi after the proposal is approved by the Department of Industrial Policy and Promotion (DIPP), it added.