Cabinet Committee on Economic Affairs cleared 2 Hero Group & Reckitt Benckiser's FDI Proposal

The Cabinet Committee on Economic Affairs cleared two major foreign direct investment (FDI) proposals worth Rs 7800 crore on 29 March 2011. The proposals included a Rs.4500-crore offer of Hero Investments Pvt. Ltd. (HIPL), a part of the Hero Group, and Reckitt Benckiser's plan to invest about Rs.3300 crore to acquire Paras Pharmaceuticals.

The promoters of HIPL had in December 2010 agreed to buyout the entire 26 per cent stake of Japan's Honda in Hero Honda for Rs.3841.83 crore. Two private equity firms, BC India Investors II, a part of Bain Capital, and Lathe Investment Pvt Ltd, would together pick up a 29 per cent stake in Hero investments for Rs 3650 crore to help pay for the deal.

The CCEA approved the proposal of Reckitt Benckiser of the U.K. to set up a new wholly-owned subsidiary investing company with a foreign equity of 100 per cent, subscribed by Ms. Reckitt Benckiser (Singapore) Pte. Ltd and R&C Nominees, to make downstream investment in Paras Pharmaceuticals by way of acquisition of 100 per cent equity, according to an official statement.
At a time when the country’s current account deficit has touched a high of 4.1 per cent of the GDP in the second half of the fiscal 2010-11, declining FDI inflows proved to be a major worry for the government. The government is therefore working towards liberalising norms for FDI such as opening sectors such as retail and insurance are crucial for sustaining growth.