Home Ministry clearance pending for FIPB approval : ET

NEW DELHI: India’s commerce ministry has cleared the proposal by the Russian government to acquire a 20% stake in telecom company Sistema-Shyam for

about $676 million.



But, the Foreign Investment Promotion Board (FIPB), the apex government body that approves all major investments in the country from abroad, will clear the proposal only after the home ministry gives a clean chit to the deal, ET has learnt.



ET had first reported in March 2009 that the Russian government planned to pick up a 20% stake in Sistema-Shyam for about $680 million. This values the company at about $3.5 billion.



During the FIPB meet last week, the Department of Industrial Policy and Promotion (DIPP) had conveyed to the board that it had no objections with Sistema-Shyam’s move to issue equity shares for $676 million to the ‘Federal Agency for State Property Management of the Russian Federation’.



At the same time, the DIPP also added that since the investing company was a firm owned by the Russian government, the clearance from the ministry of home affairs were required for the proposal.



Sistema, one of the largest public diversified corporations in Russia and the Commonwealth of Independent States (CIS), has a 74% stake in the joint venture with the Shyam Group, which offers mobile services under the ‘MTS’ brand in India. Sistema-Shyam was amongst the nine new companies who were given licences early last year to launch mobile services.



The telco, which recently launched mobile services in Delhi, plans to be a pan-India player by the end of next year.



Once the Russian government acquires a 20% stake in the telco, Sistema’s stake in the JV will come down to about 54%. But, Sistema will continue to have a majority stake and management control of the company. There will be no changes in the shareholding in Shyam, who will continue to have a 24% equity in the JV.



As reported earlier by ET, the Russian government is utilising the money under the Rupee-Rouble debt agreement between both the countries to finance its 20% stake in the telco.



With India owing huge amounts to Russia (for products bought prior to the collapse of the Soviet Union), both the governments had agreed that Russia can utilise this rupee debt to finance its investments and JV projects in India.