NEW DELHI, AUG 7: Tobacco major VST Industries Ltd has sought the approval of Foreign Investment Promotion Board (FIPB) to increase the foreign equity stake held by two subsidiaries of BAT, UK from the present level of 31.73 per cent to upto 50 per cent.

Interestingly, the Andhra Pradesh government, which holds 4.7 per cent stake in the company, has supported the proposal to hike the foreign stake held by BAT through Raleigh Investment Co. Ltd and Tobacco Manufacturers (India) Ltd.The company's application states that the equity hike will be effected through purchase of the unsubscribed portion of the proposed Rs 75 crore rights issue of VST Industries.

"The back up is essential in the interest of long term stability of the company and the requirement to ensure that the rights issue does not fall in the current capital market situation," the company has mentioned in its application.

The Andhra government has not shown interest in subscribing to the rights issue. The FIs and banks, who together hold 29.6 per cent stake, however, are inclined towards subscribing to the issue. According to the company, "there is a residual portion with the public and others of about 34 per cent which may or may not be fully subscribed given the present state of the capital market."

VST has stressed that the success of the issue is critical for the future of the company as the funds will be utilised to support VST Natural Products' (a wholly owned subsidiary of VST) 100 per cent export oriented project to process vegetables and manufacture oleoresins in Andhra Pradesh with an investment of Rs 48 crore.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.