The Foreign Investment Promotion Board (FIPB) has approved private equity firm Actis' proposal to acquire a 25% stake in Swaraj Mazda through an open offer, subject to the condition that the Indian company submits a supporting board resolution for the open offer.

While the FIPB has approved the proposal of the private equity firm it has stated that the "amendment letter will be issued subject to the submission of the board resolution by the company'.

From the conditional approval given by FIPB, it appears that the open offer will be able to proceed only after the Swaraj Mazda board gives its consent. The board consent, it may
be pointed out, has not been sent to the FIPB yet.

Actis has, meanwhile, assured the government that the board resolution would be submitted later. However, it remains to be seen whether this is indeed the case, as it is understood that there are differences in the Swaraj Mazda board over the open offer.
A section of the board is learnt to be opposed to the proposed open offer on the ground that the private equity firm would bring little value.

A board meeting convened last month to deliberate on this issue failed to arrive at a conclusion. Actis (formerly called CDC Capital Partners) had scheduled an open offer for Swaraj Mazda shareholders at Rs 315 per share aggregating to Rs 82.58 crore between November 23 and December 15.

However, it had to defer the open offer as it had not obtained approval from appropriate regulatory authorities.

Swaraj Mazda, a Punjab-based commercial vehicle manufacturer, is a joint venture between Punjab Tractors Limited (PTL) and Japanese giants Mazda Motor and Sumitomo.

Actis had earlier acquired 24% in PTL as part of the Punjab government's disinvestment exercise and has also picked up a sizeable amount of Swaraj Mazda shares from the secondary market, thereby taking its shareholding in Punjab Tractors close to the 15 % open offer trigger.