Foreign investors in licensed sectors have to divest 26%

NEW DELHI: Foreign direct investors pumping money in the licensed sectors would have to mandatorily divest 26 per cent of their equity in the domestic market within five years in case they list their scrip in the international market.

This condition would thus apply to licensed telecom activities such as value-added telecom services, but not to IT-enabled services such as call centres. In the licensed telecom activities, the 26 per cent divestment condition would apply to ISPs without gateways, infrastructure providers providing dark fibre (IP category-I), electronic mail, voice mail, irrespective of whether the service is provided by satellite and submarine cables. The divestment condition would also apply to B2B e-commerce.

This clarification in FDI classification has been brought about by clearances given by the Foreign Investment Promotion Board (FIPB) to Stream Tracmail for increasing foreign equity to 100 per cent.

For this, the company proposed to transfer 20 equity shares amounting to Rs 200 held by two residents, Adii Cooper and Sudhir Khanuja, to the foreign collaborator. The foreign collaborator already held 1,12,86,448 shares of Rs 10 each amounting to Rs 11,28,64,480 in the company.

The FIPB cleared the proposal, but subjected to the condition that the company would divest 26 per cent of the stake in favour of domestic public within five years if it were to list its stock in the international market.

The company represented to the FIPB against the mandatory divestment clause. Based on the points raised by it, the FIPB re-examined the case on file and took the view that since the company was registered as a call centre with the department of telecommunications, it was not required to adhere to the mandatory divestment clause.