Exempt FDI in aviation from Sebi takeover code: Industry Ministry

NEW DELHI: In a move to help cash-starved airlines like Kingfisher, the industry ministry is pitching in for exemption of the sector from Sebi's takeover code, which would come in the way of foreign carriers picking up a 26% stake in domestic companies, sources said.

The finance ministry had in the first week of December given its approval to the proposal of the department of industrial policy and promotion for allowing 26% foreign direct investment ( FDI) by foreign airlines in domestic carriers.

However, the finance ministry's consent came with the rider that such investments should not violate market regulator Sebi's takeover code, under which an open offer is triggered once an investor acquires a 26% stake in a listed company.

However, such a situation would lead to a Catch-22 situation, as the open offer trigger would take the FDI in the domestic carrier to 51%, breaching the proposed cap of 26%.

In a letter to the economic affairs department, the department of industrial policy and promotion has requested "a general exemption from Sebi regulations so that the same are not in conflict with the FDI policy".