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5-year cap for 74% FDI stake in e-com ventures

Our Bureau

NEW DELHI, Aug. 28

THE Government has clarified that foreign investors with equity contribution exceeding 74 per cent in Indian e-commerce ventures should bring down their stake to 74 per cent within five years of the commencement of business-to-business (B2B) e-commerce a ctivities.

Companies undertaking B2B e-commerce activities, and not retail trading, are now permitted to have up to 100 per cent foreign direct investment. At the same time, it had been stipulated by the Government in July this year that companies listed in other p arts of the world and holding foreign equity in such e-commerce ventures in India would have to divest 26 per cent of their equity in favour of Indian public within five years.

``It is clarified that disinvestment of 26 per cent of equity in favour of the Indian public in five years would be applicable in cases where the foreign equity contribution is more than 74 per cent and up to 100 per cent. In such cases, the foreign inve stors shall be required to divest their equity, to the extent it exceeds 74 per cent to the Indian public'', an official release said here today.

The release also said that FDI up to 100 per cent in e-commerce activities will remain under the automatic route and prior approval of the Foreign Investment Promotion Board or the Government is not required.