Sistema Facing Hurdles in Raising Stake in Indian Subsidiary
Published on: 9th Jun 2014
Plans by Russia's Sistema to increase its holding in its Indian subsidiary could be put on hold as the regulators are concerned about how the transaction is being structured.
Sistema owns 73.95% of MTS India and has applied to lift this to full ownership and will buy out the minority Indian shareholders.
However, the transaction is structured less as an investment by a foreign shareholder than as a foreign debt agreement, which has raised concerns with the authorities that approve foreign investments.
Sistema wants to lift its stake through the use of redeemable preference shares and optionally convertible redeemable preference shares rather than a simple cash investment.
As such, it does not qualify as Foreign Direct Investment under the definition used by the government, which is not in itself a problem for the transaction, but does complicate the regulatory approval.
Sistema's 74% stake is made up of 56.68% held directly, along with the Russian government indirectly owning 17.14 percent and 0.13 percent other foreign entities.