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The Telecom Commission (TC) yesterday approved a proposal to allow foreign direct investment (FDI) up to 100% from the present level of 74%, in a move which is positive for domestic telecom companies which are feeling the financial pressure of large debt. While TC has approved raising FDI limit to 100%, FDI up to 49% investment can be made through the automatic route, for anything beyond that permission of the Foreign Investment Promotion Board (FIPB) will be required. At present, India allows 74% of FDI in telecom sector, of which 49% is done through automatic route and the remaining is through FIPB approval.
The decision however has to be approved by the cabinet where it is expected to find opposition from the defence as well as the Home ministry which have raised security issues about allowing 100% FDI in such sensitive sectors. However, if it is cleared, foreign telecom companies which had to get an Indian partner primarily to meet the FDI norms while they ran the company, can now easily buy them out. It will also help the Indian telecom companies which have high debt on their books and have been looking at getting in strategic investors to retire debt through infusion of equity. It would also obviate the need for foreign telecom companies to always find another Indian partner if its earlier partner decides to walk out.
Commenting on telecom sector, Angel Broking, said, ''Following TC's approval, the Department of Telecommunications (DoT) will send a detailed note to the Department of Industrial Policy and Promotion (DIPP) and the proposal will then be forwarded to the Cabinet for approval. We believe that this move will be a catalyst for the already burdened telecom industry. We continue to remain 'Neutral' on overall telecom sector.''
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The decision however has to be approved by the cabinet where it is expected to find opposition from the defence as well as the Home ministry which have raised security issues about allowing 100% FDI in such sensitive sectors. However, if it is cleared, foreign telecom companies which had to get an Indian partner primarily to meet the FDI norms while they ran the company, can now easily buy them out. It will also help the Indian telecom companies which have high debt on their books and have been looking at getting in strategic investors to retire debt through infusion of equity. It would also obviate the need for foreign telecom companies to always find another Indian partner if its earlier partner decides to walk out.
Commenting on telecom sector, Angel Broking, said, ''Following TC's approval, the Department of Telecommunications (DoT) will send a detailed note to the Department of Industrial Policy and Promotion (DIPP) and the proposal will then be forwarded to the Cabinet for approval. We believe that this move will be a catalyst for the already burdened telecom industry. We continue to remain 'Neutral' on overall telecom sector.''
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