Tata DoCoMo case is proof: Modi regime is making foreign investors uneasy

Every chance he gets, Narendra Modi touts his regime's resolve to make it easier for foreign investors to enter and exit. On the ground, though, things are far from rosy. In fact, the ground reality is often the opposite of what we are being told in speeches delivered at economic forums and elsewhere.

Take the case of NTT DoCoMo, Japan's largest mobile phone operator. In November 2009, DoCoMo bought 26.5% stake in Tata Teleservices for Rs 12,740 crore, at Rs 117 per share. The deal was based on the understanding that if the Japanese company exited the venture within five years, it would be paid a minimum 50% of the acquisition price. The money was to be raised by either finding a buyer for DoCoMo's 26.5% stake at market value or getting Tata Teleservices to buy the shares at half the original investment value.

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In 2014, the Tatas offered to buy DoCoMo's stake for Rs 7,250 crore, and sought the RBI's permission to seal the deal. The central bank, aware of the importance of keeping promises to international investors, was fine with the arrangement. In a note to the finance ministry quoted by Business Standard, the RBI asked that "the Tata group be allowed to buy back DoCoMo's stake at a predetermined price of Rs 58 a share despite the company's valuer, Price Waterhouse, estimating the stake at Rs 23.34 a share, 60% lower".

"The larger issue here is of fair commitment in the contracts in relation to an investment and a downside protection of an investment rather than an assured return. Besides our relationship with Japan in relation to FDI flows is also a matter to be kept in view. Therefore, we are inclined to accept the proposal," the note reasoned.