Government Clears Vodafone Idea’s FDI Proposal Ahead of Rs 25,000 Crore Fundraising

The government on Thursday cleared an FDI proposal of telecom giant Vodafone Idea Limited (VIL) ahead of its proposed fundraising up to Rs 25,000 crore rights issue. “The Cabinet has approved the proposal of Vodafone Idea Ltd, which had proposed foreign direct investment (FDI) of more than Rs 5,000 crore which may extend up to Rs 25,000 crore,” Finance Minister Arun Jaitley said after announcing the decisions taken by the Cabinet Committee on Economic Affairs (CCEA). The CCEA has also approved to take on record the proposed changes in the indirect foreign investment in the subsidiaries of VIL that will take place on account of non-residents subscribing to the equity shares in the fundraising, an official statement said.

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Foreign direct investment up to 100% is allowed in India’s booming telecom services sector with 49 per cent allowed under the automatic route and beyond that through government route subject to observance of stipulated conditions by the licensee and investors. “However, in consideration of the extant FDI policy and procedure, it is necessary to take the government approval for FDI beyond Rs 5,000 crore even if there is no change in the percentage of foreign/ NRI equity already approved,” the statement said.

Last month, the board of directors of VIL had approved Rs 25,000 crore fundraising plan by way of the rights issue to the existing eligible equity shareholders.

The promoter shareholders Vodafone Group and Aditya Birla Group have told the board that they intend to contribute up to Rs 11,000 crore and up to Rs 7,250 crore, respectively, as part of such rights issue.