The Foreign Investment Promotion Board on Friday gave conditional approval to the proposal of InterGlobe Aviation which would pave the way for fresh foreign direct investment in private air carrier IndiGo.
"IndiGo's proposal has been cleared subject to approval of High Court," an official said after a meeting of the Foreign Investment Promotion Board (FIPB) headed by Finance Secretary Arvind Mayaram.
InterGlobe Aviation is the holding company of IndiGo. As per the proposal, equity holding of IndiGo's promoter Rakesh Gangwal through Caelum Investments will be classified as NRI investment and free the FDI limit for fresh investment.
Gangwal through Caelum Investments (incorporated in Delaware, US) holds a 47.88 per cent stake in InterGlobe Aviation. Rahul Bhatia owns the remaining stake in InterGlobe Aviation.
According to FDI rules, foreign companies and foreign airlines are allowed to hold up to a 49 per cent stake in an Indian airline. NRIs are permitted to hold up to 100 per cent in an Indian carrier.
Currently, Gangwal's stake is classified as FDI even though a group of NRIs hold the majority stake in Caelum Investments.
As per sources, the proposal is that Caelum will be merged into InterGlobe Aviation. The 147,000 equity shares held by Caelum in InterGlobe Aviation will be cancelled.
In a cashless transaction, InterGlobe Aviation will issue 147,000 equity shares having face value of Rs 1,000 to NRI owners of Caelum in in proportion to the voting units held by them.