The Board of Approvals, under the Union Ministry of Commerce, has given its conditional nod to a GMR Group proposal to buy out the 50 per cent stake owned by its partner Malaysian Aerospace Engineering in an aircraft maintenance repair and overhaul (MRO) unit.
The MRO unit is located at an Special Economic Zone (SEZ) near the Hyderabad International Airport.
"After deliberations, the Board has decided to approve the proposal subject to each entity independently fulfilling the following conditions," the Board of Approvals said as per the minutes of its recent meeting.
As part of conditions to be fulfilled, GMR Group would have to ensure seamless continuity of SEZ activities, with unaltered responsibilities and obligations for the altered co-developer entity.
Earlier, GMR had informed the Board of Approvals that the decision to acquire the stake was taken after its Malaysian partner expressed inability to infuse more funds into the loss making MRO facility.
Malaysian Aerospace Engineering (MAE) had informed that its parent company Malaysia Airlines Systems has been incurring losses for the past few years. These losses have been further aggravated by the mysterious disappearance of flight MH370 a few months ago.
The Board of Approvals has instructed both GMR and MAE to comply with all the departments like revenue, company affairs and SEBI which regulate issues like capital gains, equity change, transfer as well as taxability with regard to change of equity.
"The assessing officer under the Income Tax Act, 1961, shall have the right to assess the taxability of the amount arising out of the transfer of equity. Applicants shall comply with relevant state government laws, including those relating to lease of land, as applicable," the Board of Approvals said.
The MRO facility being operated under the name of MAS GMR Aerospace Engineering Company Ltd (MGAECL) was set up at an investment of around Rs 350 crore.
It is a fully-owned subsidiary of MAS GMR Aerospace Engineering Co (MGAE), while MGAE itself is a 50:50 joint venture partnership between Malaysian Aerospace Engineering (MAE) and GMR Hyderabad International Airport (GHIAL).
MGAECL started its commercial operations in November, 2011. During the last three years, the company incurred cumulative losses of Rs 240.30 crore as on March 31, 2014.
Mostly, promoters have been funding its operations.
After the acquisition of equity from MAE, GHIAL would hold 100 per cent equity of MAS GMR Aerospace Engineering Ltd and the name would be changed from MAS GMR Aerospace Engineering Company Ltd to GMR Aerospace Engineering Company Ltd.