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Overseas acquisition -- Infosys, Wipro bid for blanket nod rejected

Shaji Vikraman

NEW DELHI, June 18

THE Finance Ministry has informed the Reserve Bank of India that the proposals of Infosys Technologies Ltd and Wipro, seeking a blanket approval for overseas acquisition, would be treated as closed.

The implicit rejection by the Ministry of the proposal, for a blanket approval of up to a value limit of $10 billions for acquiring companies made by both the IT majors, will mean that they will have to put in a fresh proposal for high-value acquisitions . According to the revised policy guidelines on overseas investment, a company has the leeway to finance its overseas acquisition plans up to 10 times its export earnings.

For information technology companies, the automatic route for issue of ADRs and GDRs is also open for acquisitions up to a limit of $100 millions. Going by the norm of export earnings, Infosys will be able to obtain an approval for acquisitions up to a v alue of close to $2 billions.

If the company wants to obtain an approval for a higher limit, it will have to approach the Special Composite Committee. This committee includes the Secretary, Department of Economic Affairs (DEA), and senior officials from the RBI, the Commerce Ministry , and the Industry Ministry.

According to Government officials, the Ministry has already written to the RBI on the proposals submitted by Infosys and Wipro. These companies will now have to revise their proposals for reconsideration, they said.

An Infosys official said that the issue will be taken up only when the company identifies its target for acquisition. ``We are confident that approvals will come fast after proposals are put in,'' he said.

Although much of the proposed overseas takeover plans of information technology companies have not taken off, the aggregate of approvals for this year has been on the upswing. Government officials said that it had topped the $750-million mark with severa l manufacturing companies now investing abroad. The list also includes several small, unlisted IT companies which have established a foothold abroad.