India won’t relax FDI rules for DoCoMo case

The Indian government does not intend to relax rules regarding foreign investments to allow Japan’s NTT DoCoMo to exit its Tata DoCoMo joint venture at a pre-determined price.

The government has taken the view that there is no case for bending the rules for a single company.

Rules that have been in place since 2007 – almost two years before Tata Group and NTT DoCoMo entered the joint venture – stipulate that no foreign investor is entitled to exit its investment at a pre-determined price or with assured return, the report states.

But the agreement between NTT DoCoMo and Tata Group stipulated that DoCoMo was entitled to sell its shares at the highest of either the market price or half the initial subscription price.

An arbitration court recently found Tata Group’s majority shareholders and Tata Teleservices liable for $1.17 billion in damages due to the failure to live up to the shareholder agreement, even though the Reserve Bank of India is prohibiting the company from doing so due to the rules.

The government is considering amending the regulations for future foreign direct investments, introducing a price band rather than the current fair price stipulation, to make the market more attractive to investors. But the finance ministry has ruled out applying the rules retroactively to cover the DoCoMo transaction.