 "Ind Min wants FDI in airlines exempted from Sebi takeover code")
New Delhi: In a move to help cash-starved airlines like Kingfisher, the Industry Ministry is pitching for exemption of the sector from Sebi’s takeover code, which would come in the way of foreign carriers picking up a 26 percent stake in domestic companies, sources said.
The Finance Ministry had in the first week of December given its nod to the proposal of the Department of Industrial Policy and Promotion (DIPP) for allowing 26 percent foreign direct investment (FDI) by foreign airlines in domestic carriers.
[caption id=“attachment_175420” align=“alignleft” width=“380” caption=“Most of the domestic airlines, including Kingfisher, Spice and Jet Airways, are listed companies and are in dire straits with respect to the state of their finances. Reuters”]  [/caption]
However, the Finance Ministry’s consent came with the rider that such investments should not violate Sebi’s takeover code, under which an open offer is triggered once an investor acquires a 26 percent stake in a listed company.
However, such a situation would lead to a Catch-22 situation, as the open offer trigger would take the FDI in the domestic carrier to 51 percent, breaching the proposed cap of 26 percent.
In a letter to the Department of Economic Affairs (DEA), the DIPP has requested “a general exemption from Sebi regulations so that the same are not in conflict with the FDI policy”.
The sources said the DEA would seek an expert opinion on the issue from its capital markets division.
Most of the domestic airlines, including Kingfisher, Spice and Jet Airways, are listed companies and are in dire straits with respect to the state of their finances.
As per the present policy, up to 49 percent FDI is allowed in domestic carriers, but foreign airlines have been kept out of the option.
The policy tweaking may help the domestic industry get foreign investment.
PTI
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