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INDIA BUSINESS WORLD - May 2005
THE MONTH THAT WAS
WARBURG SECURES FIPB NOD TO RAISE MAX INDIA STAKE
Pincus should be pleased. After several months of waiting, it has finally obtained FIPB permission to increase its shareholding in Max India to 49 %.
The Max India-Warburg Pincus deal was struck last May at a price of Rs 200 per share. Subsequently, the Max India scrip has shot up to more than Rs 500. It is therefore highly probable that the terms and the price will be revised if the investment has to go through. And if that is so, it could mean that fresh approvals may have to be sought all over again.
Meanwhile, in the interim period, Warburg has already picked up a 14.9 % stake in Max India for around Rs 80 crore and has also acquired a 13.8 % shareholding in Max Healthcare for Rs 25 crore. Quite clearly, business and markets are moving at a much faster pace than the government, which took several months to take a decision on the Warburg Pincus proposal.
The Warburg Pincus proposal had been pending with the government as there were apprehensions that the investment by the private equity company would violate FDI sectoral caps in both the telecom and the insurance sectors. Max India holds a 74% stake in Max New York Life and it also held a 10% stake in Hutchison Max and a 100 % stake in Comsat Max at the time the proposal was sent. It was felt that the infusion of 49% foreign equity in the parent company could result in both Max New York Life and Hutchison Max breaching the FDI limits.
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