Investment under sector specific guidelines
Investments by a person resident outside India can be made under the Automatic route if the investment falls within the sector specific investment guidelines. FIPB permission is required for investments beyond the sector specific investment guidelines, or where specific approval is required.
Investments in public/private limited companies
– An Indian company may issue equity/preference shares or convertible debentures (subject to prescribed pricing guidelines/valuation norms) to a person resident outside India, within sectoral cap guidelines, subject to compliance with the provisions of the Industrial Policy and Procedures as notified by the SIA in the Ministry of Commerce and Industry, Government of India, from time to time;
Provided that
i) the activity of the issuer company does not require an industrial licence under the provisions of the IDR Act or under the locational policy notified by Government of India under the Industrial Policy of 1991 as amended from time to time.
ii) the shares or convertible debentures are not being issued by the Indian company with a view to acquiring existing shares of any Indian company.
– Issue of non-convertible, optionally convertible or partially convertible debentures or preference shares are considered as debt and accordingly, guidelines applicable to External Commercial Borrowings apply;
– If the person purchasing the optionally convertible or partially convertible shares proposes to be a collaborator or proposes to acquire the entire shareholding of a new Indian company, prior permission of Central Government is required if there is a previous venture or tie-up in India through investment in shares or debentures or a technical collaboration or a trade-mark agreement or investment by whatever name called in the same field or allied field in which the Indian company issuing the shares is engaged;
– An Indian company, may issue equity/preference shares, subject to prescribed pricing guidelines, to a person resident outside India:
a) being a provider of technology/technical know-how against royalty / lump sum fees due for payment.
b) against External Commercial Borrowings, subject to exceptions.
Provided that the foreign equity after conversion of the royalty/lump sum/ external commercial borrowing is within the sectoral cap guidelines.
– An Indian company may issue rights shares to its existing shareholders who are persons resident outside India at a price, which is not lower than that of which the offer is made to resident shareholders, within sectoral cap guidelines and such issue is in compliance with the provisions of the Companies Act and guidelines issued by the Securities Exchange Board of India (SEBI);
– An Indian company may issue Bonus shares to its existing non-resident shareholders and such shares shall be on the same terms and conditions as regards repatriability as are applicable to the original shares;
– An Indian company may issue preference shares at a coupon rate not exceeding 300 basis points over the prime lending rate of the State Bank of India as at the day of the board of directors meeting held for issue of such shares.
