New Delhi: Faced with a steep fall in value of rupee, the Reserve Bank will scrutinise all pending applications, including that of Apollo Tyres, in the light of revised norms for outward investments.
"All pending applications for overseas investment will be decided on the basis of new norms," a senior finance ministry official said.
In order to check outflow of foreign exchange, the Reserve Bank had earlier this month imposed restrictions on Overseas Direct Investment (ODI) by Indian companies.
Under the new norms, corporates can acquire those businesses overseas which are 100 percent of their networth under the automatic route, as against 400 percent allowed earlier. Higher levels of ODI would now need prior approval from RBI.
According to sources, although the application of Apollo Tyres for its USD 2.5 billion (about Rs 14,500-crore) buyout of US-based Cooper Tire & Rubber Co was filed before the announcement of the new guideline, it would be scrutinised in the light of the changes in RBI norms.
"The acquisition is around 450 percent of the networth of Apollo Tyres. This would necessitate that the deal be covered under the approval route," sources said.
Apollo Tyres, according to the deal structure, will raise USD 1.9 billion through bond market in the US to fund it purchase the overseas company. The deal was announced in June.
"Considering the current day rupee condition and CAD, it will be interesting to watch how RBI will respond to the Apollo Tyres' application," Chief Strategist at SMC Global Securities, Jagannadham Thunuguntla, said.
The RBI's decision to restrict outward investment by corporates came in the backdrop of rising Current Account Deficit (CAD) and declining value of rupee.
The CAD, which is the difference between the inflow and outflow of foreign currency, touched a record high of 4.8 percent of the GDP in 2012-13 fiscal.
A high CAD is also putting pressure in the Rupee which tumbled to a life-time low of 65.56 to a dollar on August 22.
First Published: Sunday, August 25, 2013, 12:24