MUMBAI (Reuters) - Tata Sons Ltd on Tuesday said the Reserve Bank of India (RBI) has rejected its request to buy Japanese group NTT DoCoMo Inc’s stake in their Indian telecom joint venture at a premium to its current fair value.
In January the RBI had said it was “inclined to accept” Tata’s proposal to pay $1.1 billion for DoCoMo’s near 26 percent stake in Tata Teleservices, the seventh-biggest mobile phone network operator, but had asked for the finance ministry’s view.
Under the original deal signed in 2009, when DoCoMo invested $2.2 billion in the mobile carrier, it was agreed that in the event of an exit the Japanese company would get the higher of either half the original investment or fair value.
Tata had then sought the central bank’s approval to purchase the stake at half the price DoCoMo paid in 2009 after it failed to find another buyer, following which DoCoMo sought arbitration in a London court.
“RBI has conveyed that it cannot accede to this request as the same is not in conformity with the extant FEMA regulations, and has advised that any such purchase of shares be at current fair value of the shares,” the company said in a statement on Tuesday.
The Foreign Exchange Management Act governs cross-border transactions.
The company said the matter will now have to be resolved in arbitration with Docomo, for which it has initiated steps.
Reporting by Aman Shah in Mumbai; Editing by Sumeet Chatterjee and Greg Mahlich