NEW DELHI, Dec 27: The government has opened the automatic approval route for financing acquisition of software companies abroad. This is aimed at helping the Indian software firms to fully exploit their inherent strengths and become global players.According to the revised guidelines, the Indian companies will not be requiring either the approval of the Special Committee for overseas investment or the government for accessing the ADR/GDR route for acquisition purposes. Also upto 100 per cent of the ADR/GDR proceeds can be used for acquisition.It was further clarified that the automatic facility would be available only to those companies which have already floated ADR/GDRs and had a track record. Those companies, which have not floated ADR/GDRs, will be eligible to obtain a "one-time blanket approval" from the Special Composite Committee for availing the automatic facility.The value limit for the scheme will be $ 100 million, which will be an annual limit for each company for one or more acquisitions.Cases involving business acquisition exceeding $ 100 million will be considered by a Special Composite Committee, which will be a composite panel both for the purposes of overseas investment and for approving ADR/GDR flotation.Such a committee, it was stated, while examining the merits of the proposal, would also take into account the confidentiality of the proposal and if necessary, would provide flexibility for negotiations within certain parameters. The applications for the consideration of the Special Composite Committee would have to be made to the Reserve Bank in the existing forms for overseas investment. As per the new guidelines, the ADR/GDRs to be issued under the scheme would be by way of expansion in the capital base by issue of fresh underlying shares of the company. The acquisition of shares of foreign companies will be done by giving adequate GDR/ADR so as to cover the cost of acquisition.The proposals, it was clarified, would have to conform to the valuation norms as per therecommendations of an investment banker, which in the case of a listed overseas company will be based on the current market capitalisation of the overseas company (based on the monthly average trading on the overseas exchange, for the three months preceding the month in which the acquisition is committed to) and premium, if any.For the purpose of the scheme, an investment banker has been defined as a banker registered with the Securities Exchange Commission in the US or under the Financial Services Authority in Exchange Commission in UK or the appropriate regulatory authority in Germany, France, Singapore or in Japan.
