Air conditioner maker Voltas on Wednesday said it has terminated an agreement to set up a joint venture with Highly International (Hong Kong) Ltd to manufacture compressors in India, as it could not obtain necessary approvals from the government.

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The proposed JV of the Tata Group firm with Highly International was subject to clearance from the government under Press Note No 3(PN3).

"As the regulatory approvals were not forthcoming, both the parties have mutually decided to terminate the Joint Venture Agreement," said a regulatory update from Voltas.

Through PN3, the government had made its prior approval mandatory for foreign investments from countries that share a land border with India in order to curb opportunistic takeovers of domestic firms following the COVID-19 pandemic.

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Countries that share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan. As per that decision, FDI proposals from these countries need government approval for investments in India in any sector.

Voltas is a leading player in the compressor-based cooling market. It was trying to reduce dependency on the import of important components such as compressors by setting up a JV here.

"The JV was subject to fulfilment/satisfaction of certain conditions precedent to 'Closing' of the transaction and obtaining necessary approvals, including under Press Note No.3 (2020 series) dated 17th April 2020 issued by Ministry of Commerce, Department for Promotion of Industry and Internal Trade," said Voltas.

In May last year, Voltas had said it had executed a joint venture agreement with Highly International (Hong Kong), to engage in the business of design, development, manufacture, marketing, sale and service of inverter compressors for room ACs, motors for inverter compressors and their associated parts.

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The agreement also included sourcing of raw materials and components required for manufacturing these products, it added.

In the JV, Highly, a wholly-owned subsidiary of Shanghai Highly (Group) Company, had a majority of 60 percent shareholding while the rest was owned by Voltas. In the financial year 2022-23, Voltas had a revenue of Rs 9,667.22 crore.