Mumbai: Tata Sons has been ordered to pay NTT DOCOMO, a Japanese tele firm, $1.17 billion as fine over a deal agreement failure, by a London Court. The London Court of International Arbitration ruled in favour of DoCoMo over price it was entitled for exiting the Indian joint venture.
Tatas offer to DoCoMo was in line with the Reserve Bank of India guidelines that state that an international firm can only exit its investment at a valuation “not exceeding that arrived at on the basis of return on equity.” It had made an offer of Rs 23.34 a share after the finance ministry and the RBI rejected the Group’s application to buy back DoCoMo’s shares at the pre-agreed valuation of Rs 58 a share. The 60 per cent lower offer was made on the basis of a fair market value determined on June 30, 2014.
In November 2009, Docomo had acquired 26.5 per cent stake in Tata Teleservices for about Rs 12,740 crore (at Rs 117 per share). Later, in April 2014, the company decided to exit after the joint venture struggled to grow subscribers quickly. DoCoMo said its 2008 investment was with an understanding that it would get at least 50 per cent of its acquisition price if it exits the Indian company in five years. Accordingly, it sought Rs 58 per share or Rs 7,200 crore from Tatas to buy out Japanese telecom major’s 26.5 per cent stake in the loss-making Tata Teleservices for Rs 23.34 a share.