Foreign Investment Promotion Board gives conditional nod to IndiGo's FDI proposal

New Delhi: The Foreign Investment Promotion Board (FIPB) on Friday approved a proposal from InterGlobe Aviation, the company that runs IndiGo, to reclassify shareholding of promoter Rakesh Gangwal as Non-Resident Indian (NRI) from foreign direct investment currently.

The move for reclassification of Gangwal's stake into NRI category would mean that the airline can have access to fresh foreign direct investment. While Indian carriers are allowed to have only 49% FDI, NRIs are permitted to own 100% in any Indian carrier.

At present, Rakesh Gangwal through Caelum Investments (incorporated in Delaware, US) holds 47.88% stake in InterGlobe Aviation. Rahul Bhatia owns the remaining stake in InterGlobe Aviation.

InterGlobe, in its application to the FIPB, had said that the reclassification of Gangwal's stake into NRI holding would free up FDI limit and open up possibilities for fresh induction of foreign investments in the airline, as and when required.

Rakesh Gangwal's holding is considered as FDI even though majority stake in Caelum is held by NRIs. Rakesh Gangwal owns 40% stake in Caelum, his wife Shobha Gangwal 20%. The remaining shares are held by The Chinkerpoo Family Trust. InterGlobe Aviation's proposal seeks permission from FIPB to convert Rakesh Gangwal's stake into NRI holding.

As per the proposal Caelum would be merged into InterGlobe Aviation.

The 147,000 equity shares held by Caelum in InterGlobe Aviation will be cancelled. In a cashless transaction, InterGlobe Aviation would issue 147,000 equity shares having a face value of 1,000 to non-resident members of Caelum Investments. The shares will be allotted in proportion to the voting units held by such members in Caelum.

The overall NRI holding in InterGlobe will not increase. However, after the merger a part of the shareholding will be held by NRIs. The scheme has been sanctioned by the Delhi High Court.Since the said proposal involves the merger of a non-resident company into an Indian one, FIPB approval is required for issuing equity shares.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.