Move permitting 26% FDI in aviation gets FinMin nod

New Delhi: In what may help beleaguered airlines Kingfisher, the finance ministry has approved a draft Cabinet note floated by the commerce and industry ministry allowing foreign fliers to acquire up to 26 per cent stake in India’s aviation companies.
However, there is a hitch. The finance ministry wants the commerce and industry ministry to see that any such policy conforms to a new takeover code, where companies have to go for an open offer if they acquire at least 25 per cent stake.
In this regard, the finance ministry wants the Department of Industrial Policy and Promotion (DIPP) under the commerce and industry ministry to consult Securities and Exchange Board of India (Sebi), as some airlines like Kingfisher and Jet Airways are listed companies, officials said on Monday.
The new takeover code, effected by Sebi from October 22, prescribes that any acquirer taking at least 25 per cent stake in a company has to go for an open offer for another 26 per cent. Thus, foreign airlines’ stake, in case this policy is allowed, can go up to 52 per cent, which would make them majority owner.
The officials said DIPP can, after consultations with Sebi, start working on the Cabinet note. A Cabinet meeting slated for Wednesday, though, is unlikely to take up this issue. It may come up only either next week or thereafter, depending on a solution to a more pressing and vexed issue before the Cabinet: Foreign direct investment (FDI) in multi-brand retail. There is another hurdle to the proposal: The civil aviation ministry still favours 24 per cent cap in this regard, which many say will not attract foreign airlines to pick stake in Indian fliers.
06/12/11 Business Standard

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Categories: Foreign Dec 2011, Indian Aviation- In General Dec 2011