Communication services major Bates Singapore Pvt Ltd's plan to acquire 74 per cent in Indian marketing services firm Sercon has been deferred for the third and last time by the Foreign Investment Promotion Board owing to differences among its members over whether or not it attracts the provisions of Press Note 1.
The Department of Industrial Policy and Promotion (DIPP), which is represented in the multi-ministry FIPB, has argued that the deal could jeopardise the interests of former Indian cricketer Ravi Shastri's event management firm Showdiff, in which Bates has an indirect stake through Rediffusion Dentsu, Young & Rubicam.
The issue came up for hearing before the FIPB on June 13. Before this, the case was discussed in March and June.
Press Note 1 of 2005 is a guideline that stipulates that foreign investors with joint ventures need a no-objection certificate from their Indian partners if they set up independent ventures in the same or allied field.
Bates Singapore plans to acquire a stake in Sercon through a subsidiary, Russel Square.
Showdiff's argument -- which the DIPP has upheld -- is that Bates is part of communications services giant WPP Group, which holds 26.7 per cent in Rediffusion through DY&R, which it acquired in 2000. Rediffusion DY&R, in turn, holds 51 per cent in Showdiff.
Therefore, Bates is indirectly a shareholder in Showdiff and is a foreign investor with an existing joint venture in the same field.
The other members, representing the departments of commerce, revenue and economic affairs, among others, differed with the DIPP on two counts: First, there was no exclusivity agreement between Showdiff and Rediffusion DY&R.
Second, the connection between Bates and Showdiff was at the "grandfather" stage.
Given the rapid growth of the event management business, the members concluded it would not be proper to withhold permission on grounds of "anticipated jeopardy" since Showdiff had not been able to show any concrete proof of such jeopardy.
Bates and Showdiff executives were unavailable for comment. Diwan Arun Nanda, chairman and managing director, Rediffusion DY&R, said: "The appeal to FIPB is by Showdiff, a joint venture between cricketer Ravi Shastri and Rediffusion DY&R. We have still not received their decision."
