The Reserve Bank of India (RBI) has rejected Tata Sons’ proposal to buy Japanese telco NTT Docomo’s stake in their Indian joint venture, Tata Teleservices, at a premium to its fair value.
“RBI has conveyed that it cannot accede to this request…
The Reserve Bank of India (RBI) has rejected Tata Sons’ proposal to buy Japanese telco NTT Docomo’s stake in their Indian joint venture, Tata Teleservices, at a premium to its fair value.
“RBI has conveyed that it cannot accede to this request as the same is not in conformity with the extant Foreign Exchange Management Act [FEMA] regulations, and has advised that any such purchase of shares be at fair value current fair value of the share,” Tata Sons, the holding company of the conglomerate Tata Group, said in a statement.
As such, the matter will need to go to arbitration, the holding noted.
In January, the central bank had said it was inclined to accept Tata Sons’ plan to pay Rs58.04 (US$0.93) per share for NTT Docomo’s 26% stake in the JV – about US$1.1bn in total.
According to local media reports, RBI had consulted the finance ministry on its proposal to relax a bank ruling preventing foreign investors from selling stakes in Indian firms at pre-set prices.
However, an Economic Times report today said the finance ministry is believed to have told the bank to stick to its guidelines.
Last year, NTT Docomo exercised its option under a 2009 agreement with Tata Sons to request that the holding sell its stake in the JV for either Rs72.5bn (US$1.14bn) – half of its original investment – or a fair market price, whichever was higher. PwC has reportedly determined Tata Teleservices shares have a fair value of Rs23.34 each.
In November, Tata Sons reportedly told RBI that it had been unable to find a buyer and sought approval to buy the shares itself at Rps58.04 per share.
However, this January, NTT Docomo filed for arbitration with Tata Sons in a London court because of the Indian company’s failure to find a buyer for its shares.
