RBI Agrees Docomo Buyback Proposal of Tata Group

Reserve Bank of India (RBI) has agreed to a Tata group proposal to buy back DoCoMo's 26.5 per cent stake in Tata Teleservices at a pre-determined price of Rs 58 a share (Rs 7,250 crore for the entire stake), despite the company's valuer, Price Waterhouse, estimating the stake at Rs 23.34 a share, 60 per cent lower.

RBI has referred the matter to the investment division of the Department of Economic Affairs under the finance ministry for views and comments.

On December 22 2014, RBI told the finance ministry the Tatas had hired Price Waterhouse to determine the fair value of the shares of Tata Teleservices, soon after DoCoMo expressed interest to exit the company in April 2014. RBI said the Tatas agreed to buy back the shares at Rs 58 a share and had sought the central bank's permission for the transaction, as the price to be paid was higher than the fair-price valuation.

It added that Price Waterhouse valued DoCoMo's stake at Rs 2,915 crore, against the Rs 7,250 crore sought by the Japanese company, according to its 2009 agreement with the Tatas. The total valuation of Tata Teleservices, according to the valuer, was only Rs 11,000 crore, against the pre-agreed valuation of Rs 27,000 crore.

The RBI letter says according to the agreement between the two companies, the exit price was Rs 58 a share. But it added according to a circular dated July 15 last year, the issue and transfer of shares were to be at a price worked out in line with an internationally agreed methodology, on an arm's-length basis. "Thus, the guiding principle will be that the non-resident investor is not guaranteed any assured price at the time of making the investment/agreement and will exit at a fair price, subject to lock-in period requirements," RBI said.