Mr. Tariq Ansari, managing director, Mid-Day Multimedia Ltd. (MML), clarified yesterday that MML had received all the necessary approvals for the issue of its equity shares to, among others, foreign institutional investors (FIIs).
Mr. Ansari was responding to reports in a section of the press questioning whether FIIs could invest in the recently-opened Mid-Day Multimedia Ltd's initial public offering (IPO). Schedule 1 (Regulation (5) (1) of Fema covers sectorial restrictions on foreign direct investment (FDI) in 13 categories, including broadcasting, banking and non-banking finance companies, housing and real estate among others. As per Schedule 1, any foreign investment in these has to be referred to the government. But Schedule 2 of Fema further goes on to clarify the extent of foreign investment that can be made in these categories after the necessary approvals have been obtained.
This schedule only covers the quantitative restrictions on the extent of holding by foreign entities.
Schedule 2 covers the purchase and sale of shares and convertible debentures by registered FIIs under the portfolio investment scheme. Under schedule 2, registered FIIs may invest in listed or unlisted companies, subject to a ceiling on total investment.
According to some analysts, if Schedule 1 is applicable to Schedule 2 FIIs would not be able to invest in companies like SBI, HDFC and Zee Telefilms.
The RBI clearance, issued to Mid-Day Multimedia Ltd., on November 17, 2000 said: "You have our approval to issue equity shares to FIIs with repatriation benefits out of your public issue of Rs 51 crore (inclusive of premium)." It also added, "the permission granted may also be treated as our permission to the FIIs for acquiring fully-paid equity shares of your company on repatriation basis".
A Mid-Day Multimedia executive said the issue is on course. The book building portion will close on February 16.