Finance Ministry allows 26% FDI in Indian airlines

The finance ministry was contemplating allowing foreign carriers to buy 49% stake in Indian carriers, but the finance minister has gone in for 26%

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The government seems to be pushing ahead with its plan to open up the aviation sector. Sources informed that the finance ministry has given its nod for foreign airlines to buy up to 26% stake in Indian carriers, reports CNBC-TV18's Aakanksha Sethi.

The finance ministry was contemplating allowing foreign carriers to buy 49% stake in Indian carriers, but the finance minister has gone in for 26%. He also said that the SEBI takeover code will have to be tweaked to allow for this. There is a trigger point of acquiring stake of 25%, after which the company has to make a mandatory open offer of 26%.

If foreign airlines are allowed to buy 26%, then they would have to do another mandatory open offer of 26% that will take their total stake to 52%, whereas the sectoral cap in aviation is only 51%, which will be breached.

The takeover code will be tweaked to say that the mandatory open offer size will have to be inline with the sectoral cap for aviation sector in specific, which means it will have to be within 49%.

So, this change will also have to be made for this proposal to go forth. It remains to be seen what the other ministries, especially home ministry, has to say on this proposal.

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