DoT, which had earlier objected to Hutch's plans to merge its four associate cellular companies with itself, has now clarified that the FDI ceiling of 49% is not being violated.

The merged company will have a foreign shareholding of 48.52% and the equity is likely to be from 72-74% in the holding company, only if the proportionate foreign equity of the Indian companies holding shares in these are reflected in the composition of Hutchison Max. FIPB has now forwarded the proposal to the finance ministry.

Hutchison's proposal to acquire the foreign holdings in four of its associate cellular companies had earlier come under DoT's scanner. Hutch's proposed IPO plans are also dependent on the formation of a four-way merged entity. The four associate cellular ventures are Hutchison Essar Telecom, Hutchison Telecom East, Fascel and Hutchison Essar South.

Indian companies with foreign equity stake can also hold shares of the merged company. These include Essar Teleholdings, Usha Martin, Telecom Investments, Indusind Telecom, Jaykay Finholding and Max Televentures.

In a draft Cabinet note, the DoT has proposed a ceiling of 74% for both direct and indirect foreign equity holding.

Hutch plans to acquire the combined 48.96% stake of Mobilvest (Mauritius), CCII (Mauritius), Prime Metals and Euro Pacific Securities in Hutchison Essar Telecom through the swap route.

As per the swap ratio agreed between them, the four overseas companies will together get 14.43% stake in the four-way merged entity.

Similarly, Hutch will acquire the 32.58% stake of Asia Telecommunications Investments (Mauritius) in Hutchison Telecom East for swapping 5.61% of equity in the merged equity, 49% holding of Trans Crystal in Fascel in return for a 8.36% stake in the merged entity and the 49% stake of Al-Amin Investments in Hutchison Essar for a swap equity of 4.65% in the new merged entity.