FIPB rejects plan to sell 5% DSE stake to FII

The Foreign Investment Promotion Board (FIPB) has rejected Mauritius-based Passport India Investments proposal to buy a 5 per cent stake in the Delhi Stock Exchange (DSE), while deferring a decision on five other FDI proposals.

The FIPB rejected the proposal of Passport India, a fund promoted by US-based Passport Capital LLC, after the Securities and Exchange Board of India objected to a foreign institutional investor buying shares in the primary issue of a stock exchange, DSE sources said.

The rejection and deferment were announced today. According to an official release, Finance Minister P Chidambaram has approved the FIPB’s recommendations for 20 FDI proposals, made at its meeting on August 17.

Of the six investment proposals in the DSE for a 26 per cent stake, the FIPB cleared four proposals for taking a 20 per cent stake in the bourse. The FIPB deferred decision on the proposal of non-resident Indian Bhupendra Kumar Modi to buy 1 per cent stake in the DSE.

With the August-end deadline approaching to finalise domestic and foreign investors for offloading a minimum of a 51 per cent stake in the bourse according to Sebi’s demutualisation scheme, two new FDI proposals have been submitted to the FIPB for investing in the DSE, sources say.The DSE can offload a maximum 26 per cent stake in the exchange to foreign investors.

The two new foreign investment proposals in DSE are from Mauritius-based funds, New Vernon Private Equity Fund and Passport Global Master Fund.

The DSE is trying to secure an approval for the new proposals prior to the next FIPB meeting scheduled for August 31 as it has to submit the name of investors to Sebi at the earliest.

While the DSE is selling 26 per cent stake to foreign investors, it proposes to dilute a minimum 25 per cent stake to domestic investors. The DSE, defunct for the last three years, is trying to revive itself.