NEW DELHI, JULY 4: The Foreign Investment Promotion Board (FIPB) has cleared the decks for GE Capital to make an open offer for hiking its stake in SRF Finance Ltd to 100 per cent from the present level of 85 per cent.However, the FIPB has attached a rider that GE Capital will have to divest 15 per cent stake in the company to domestic shareholders within three years.SRF Finance is also being re-christened as GE Capital Transportation Financial Services Ltd (GECTFSL).GE Capital wants to "temporarily" hike its stake to 100 per cent to organise and restructure SRF Finance, mitigate its losses and bring in expertise in areas relating to new products and services, management and technology support, risk management and training employees.The company's board has already approved the sell-out to GE Capital Services. The company's open offer will be subject to the provisions of SEBI Takeover Regulations. The proposed company has been asked to confine their activities to the existing approved activities.GE Capital holds the 85 per cent stake through FMO Netherlands, IFC Washington of the US, and GE Capital (Mauritius) Investment Co Ltd.FIPB had cleared the acquisition subject to certain conditions. These required GE Capital Services to undertake only 14 permitted NBFC activities. It was stipulated that the balance 15 per cent holding shall be domestic Indian equity. SRF Finance was also told to capitalise up to $25.9 million upfront.Another rider attached to the permission stipulated that GE Capital should capitalise SRF Finance up to $50 million over the next 24 months, either directly or through a SPV subsidiary. FIPB approval has to be sought for any investment by the `special purpose vehicle' subsidiary.According to government guidelines, the minimum capitalisation required for a 100 per cent foreign owned NBFC is $50 million, of which $7.5 million has to be brought upfront and balance in 24 months. The 100 per cent NBFC can act as a holding company and specific activities can be undertaken bystep down subsidiary with minimum 25 per cent domestic equity. In the subsidiary floated by the holding company, 10 per cent domestic equity is to be brought upfront and the balance over 24 months.FIPB has accommodated GE Capital of US by allowing it to acquire 100 per cent equity ownership of SRF Finance, which is to be renamed GE Capital Transportation Financial Services Ltd. The requirement that 15 per cent of the shares of NBFCs in India must be domestically owned has been waived for three years, that is, this proportion of the equity will be divested to the Indian public within the stipulated period. GE Capital is required to bring in fresh capital of $26.9 million.
