Rejecting RBI plea for exempting Tata-DoCoMo deal from the Foreign Exchange Act, the finance ministry has said the two firms had entered into a share buyback contract in contravention of prevalent law
Rejecting RBI plea for exempting Tata-DoCoMo deal from the Foreign Exchange Act, the finance ministry has said the two firms had entered into a share buyback contract in contravention of prevalent law and the case will now have to be legally settled. Japan’s NTT DoCoMo had in November 2009 acquired 26.5 per cent stake in Tata Teleservices for about Rs 12,740 crore (at Rs 117 per share).
This was as per a 2008 understanding that in case it exits the venture within five years, it will be paid a minimum 50 per cent of the acquisition price. A top Finance ministry official said the Tata-DoCoMo buyback contract was signed despite RBI rules barring pre-set buyback pricing.
The RBI had in 2007 come out with regulations barring pre-determined share buyback contracts, he said, adding the Tata-DoCoMo contract was signed despite RBI FEMA rules barring such deals.
DoCoMo in April 2014 decided to exit the joint venture that struggled to grow subscribers quickly.
It sought Rs 58 per share from Tatas.
But Tatas offered Rs 23.34 a share in line with the RBI guidelines that states that an international firm can only exit its investment at a valuation “not exceeding that arrived at on the basis of return on equity”.
