RBI denies request for higher valuation of Tata Tele shares

Via Mint | Mar 25, 2015

Tata Sons Ltd, the holding company of the Tata group, on Tuesday said the Reserv
e Bank of India (RBI) has denied its request to buy back a stake held by Japan-b
ased NTT Docomo Inc. in Tata Teleservices Ltd at a premium to the fair value of
the shares. The RBI told Tata Sons that it cannot accede to the request because
it was not in conformity with the Foreign Exchange Management Act (Fema), and ad
vised that any such purchase of shares should be at the current fair value of th
e shares, a spokesperson for the company said. With this, Tata Sons and DoCoMo h
ave entered an arbitration phase to find a resolution. From the outset, Tata Sons
has been committed to honouring its contractual obligations to Docomo, and has
taken every possible step keeping in mind the interests of all stakeholders and
in accordance with Indian law. Tata Sons had made an application to RBI for a sp
ecial permission to pay Docomo, as per the shareholders agreement, a price that
was higher than the current fair value of the Tata Teleservices shares, the spoke
sperson said.
This issue will now have to be resolved in the arbitration between the parties. S
teps towards initiating arbitration have been taken. We will not be able to comm
ent further as the matter is sub-judice, the spokesperson added. A person familia
r with the development said Tata Sons had hired consulting firm PricewaterhouseC
oopers to ascertain the fair value of shares of Tata Teleservices. While Tata So
ns has arrived at an exit price of Rs.58 a share, the consulting firm valued the
stake at Rs.23.34 a share, he said. Tata Sons expressed its willingness to buy s
hares at premium price and had written to the banking regulator seeking special
dispensation, he said on condition of anonymity. PricewaterhouseCoopers declined
immediate comment.
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