Idea Cellular has effectively been cleared to increase its foreign direct investment (FDI) by both the Reserve Bank of India (RBI) and the country’s Department of Industrial Policy and Promotion (DIPP) - a crucial step towards final clearance for its merger with Vodafone India.
The RBI found that the proposed merger complied with the Foreign Exchange Management Act (FEMA). DIPP has asked the Department of Telecommunications (DoT) to provide documentation demonstrating that all units with shares in Idea and Vodafone India are FDI compliant.
Once the DoT has provided this documentation, the operators will be able to ask the department to transfer Vodafone’s licence to Idea so that the merger can receive final approvals. The merged entity will be India’s largest operator by both revenue and subscribers.
For its part, Vodafone India received clearance to raise FDI to 100% in December 2013, completing the process in April 2014. The DoT has been more hesitant to approve Idea’s request to increase its FDI, and has sought the opinions of several relevant agencies in reaching its decision.
In March, DoT secretary Aruna Sundararajan confirmed that the DoT was trying to expedite the Vodafone-Idea merger. The deal is awaiting the final approvals by the foreign investment and licence departments. Vodafone Group and Idea’s parent company Aditya Birla Group are expecting the transaction to close in the first half of 2018, with Vodafone COO Balesh Sharma as the new entity’s CEO.