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December 31, 1997

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Decks cleared for FI Group to bring in 28 million

The UK-based FI Group, which recently made an open offer for acquisition of a 76 per cent stake in IIS Infotech, has received government clearance to invest up to 28 million (about Rs 1.6 billion) for its plans in the country.

The FI Group has informed the Foreign Investment Promotion Board that it would make its presence in India through acquisitions or by setting up a 100 per cent subsidiary.

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The UK major's plans were approved by the FIPB at a recent meeting. Significantly, the FI Group has left its business options open. It has said that if it sets up a 100 per cent subsidiary for software development, it would pump in about 3.5 million (Rs 199.5 million).

However, if it were to acquire and establish itself, the UK company is ready to spend as much as Rs 1.42 billion. Hence, the FI Group is in fact ready to invest over Rs 1.6 billion in India.

Going by the permissions received it appears that the FI Group plans more than a single acquisition as the investment it would be making in IIS Infotech is just about Rs 600 million, much less than it has earmarked for India.

At the FIPB level, the FI Group has not had a smooth run with its first application being turned down. The decision at the FIPB meeting on June 21 this year was to close the proposal.

The contentious issue was that the business nature of the company it planned to acquire would have been altered. The FI Group had then indicated that it would submit a fresh proposal.

While approving the revised application of the FI Group, the FIPB had stated that the Indian company it may acquire "should not be a software trading company and that the company after being acquired would continue to predominantly remain a software development company''.

Besides, routine submissions such as board resolutions of the company being acquired should also be sent in within 60 days of grant of permission. In effect, this would mean that the FI Group would have to provide such information by the end of January 1998.

Having picked up 76 per cent, the company has made an open offer for the remaining 24 per cent. This offer would open on January 19 and would close on February 17.

- Compiled from the Indian media

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