(28 April 2007 6:00 am)

New Delhi: The Foreign Investment Promotion Board (FIPB) today cleared the British telecom giant Vodafone's deal to buy mobile carrier Hutchison Essar subject to some conditions, after deferring a ruling thrice.

The file will now go to the Finance Ministry for a formal and final approval. FIPB has said the British company - the world's largest mobile operator in terms of revenues - has to comply with Press Note three of the Foreign Direct Investment rules, which were recently amended to permit FDI up to 74 per cent.

The FIPB which functions under the Finance Ministry has also said the 15 per cent stake held by Indians Analjit Singh and Ashim Ghosh and foreign investors cannot be
transferred.

Vodafone had bought a controlling 52 per cent stake in HEL from Hong Kong-based Hutchison Telecom International at a total enterprise value of over 18 billion dollars.

Expressing concern on the FDI inflow into India , FIPB said the Government should review the guidelines relating to foreign investment in the country across all sectors. ''Under existing norms and guidelines, the FIPB has cleared the Vodafone deal, but the loopholes in the system need to be plugged,'' an official told reporters after the meeting here.

In the last three meetings, the Board had sought more details about the deal, particularly the size of the foreign holding in the firm.

Satisfied that the shareholding of both Analjit Singh and Asim Ghosh was Indian, the FIPB said the approval of the Government would be needed to transfer the shares held by two Indian shareholders.

''FIPB was satisfied that Vodafone only held 52 per cent under the Joint Venture,'' said an FIPB official.

Under recently announced Press Note 3 ''Indirect foreign investment shall mean foreign investment in the company/ companies holding shares of the licensee company and their holding company/companies or legal entity (such as mutual funds, trusts) on proportionate basis. In any case, the `Indian' shareholding will not be less than 26 per cent.''