Tata Sons has been ordered to pay Japan's largest mobile phone firm NTT DoCoMo $1.17 billion in compensation by an international arbitration court for breaching an India joint venture agreement from 2008.
The London Court of International Arbitration ruled in favour of DoCoMo over the price it was entitled to receive upon exiting the Indian joint venture, the Japanese firm said in a statement. 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 sell its shares 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.
In an emailed statement a Tata spokesperson said, “Tata Sons has received the arbitration award, and we are currently studying it. We will not be able to comment further at this stage, beyond maintaining our consistent position that Tata Sons has always been and continues to be committed to discharge its contractual obligations in a manner consistent with the law.”
The Japanese firm had filed for arbitration on January 5, 2015.
According to the arbitration award, Tata Sons will receive or would have to designate a recipient for DoCoMo's entire stake in TTSL. DoCoMo also said it is uncertain whether Tata Sons will pay the awarded damages.
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.
TTSL witnessed its complete net worth erode two years ago and it posted a loss of Rs 3,846 crore on a revenue of Rs 10,944 crore in 2014-15 fiscal.
With PTI inputs