Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
FDI: A step forward - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • May 10, 2001

    FDI: A step forward

    The government’s disinvestment programme has been languishing in the current year due to various structural constraints. Prominent amongst them is the cap on Foreign Direct Investment (FDI). Yesterday, the union cabinet ministry has increased the FDI limit on various sectors that includes defence, telecom, pharmaceuticals and infrastructure sectors.

    This is seen as a move in the right direction. This is because India managed to attract FDIs worth just US$ 3 bn last year against US$ 30 bn that China manages to receive every year. FDI inflow will help meet the large investment needs of the Indian economy. Apart from this, easing of the limit will benefit the government on the disinvestment front as well.

    For instance, FDI limit has been raised for telecom companies to 74% from the existing 49%. This is however only applicable for Internet Service Providers (ISPs) with gateways, radio paging and end-to-end bandwidth services. VSNL, for which the government has set a target to disinvest by December 2001, has reportedly received the letter of intent from six players, out of which five are domestic telecom companies (the only exception being Bharti-Singtel consortium). Given the lucrative Indian market, why are foreign majors not showing a keen interest in one of the largest service providers in the country?

    VSNL’s disinvestment has been under controversy due to the 49% FDI cap limit. Since the Global Depository Receipt (GDR) holders already have 30% stake in the company, an international bidder cannot hold more than 18% stake in the company. With the company disinvesting 25% stake, these international players will have to necessarily bid along with an Indian partner. Also there are other reasons like the multinational companies already having invested billions of dollars in 3G licenses, leaving little free cash flow for such investment.

    Since VSNL is also an ISP provider with more than 5 gateways, it remains to be seen whether the company falls under this category or not.

    To sum it up, the government has targeted fiscal deficit of 4.7% of Gross Domestic Product (GDP) for FY02. One of the critical components, which can seriously alter the fiscal estimates, is the disinvestment target of Rs 10 bn. To put things in perspective, if the government fails to achieve the disinvestment target, fiscal deficit will go up by 0.5%.



    Equitymaster requests your view! Post a comment on "FDI: A step forward". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms