The Department of Industrial Policy and Promotion has recently
issued a press note on 15 September 2015 to amend the consolidated
foreign direct investment policy dated 12 May 2015
("FDI Policy") permitting Indian
Companies to issue partly paid shares and warrants as eligible
capital instruments for the purpose of foreign direct investment
The key points of the Press Note are as follows –
The definition of
'Capital' has been amended to insert the
'warrants'. The revised definition of Capital
stated that "Capital means equity shares; fully,
compulsorily and mandatorily convertible preference shares; fully,
compulsorily and mandatorily convertible debentures and
The press note further clarifies that the equity shares issued in
accordance with the provisions of the Companies Act, 2013
("Act"), as applicable, shall include
equity shares that have been partly paid. Preference shares and
convertible debentures are required to be fully paid, and should be
mandatorily and fully convertible. Further,
'warrant' includes share warrant issued by an
Indian Company in accordance of provisions of the Act.
An additional clause is inserted in
the FDI Policy to state that an Indian company may issue warrants
and partly paid shares to a person resident outside India, subject
to terms and conditions as stipulated by the Reserve Bank of India
in this behalf, from time to time.
This press note is another welcome initiative by the Government
of India by amending the definition of 'Capital'
under the FDI Policy and allowing the Indian companies to issue
warrants and partly paid-up equity shares under
the automatic route subject to the sectoral cap limit. Earlier the
Indian companies were required to take the Government approval for
issuing the warrants and partly paid shares to a
person resident outside India which is now not required.
This measure will ensure more ease and alternative options to
the Indian companies for raising money through partly paid shares
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The issuance of rupee denominated bonds overseas (Masala Bonds) was permitted by RBI's circular dated 29 September 2015 read with the relevant provisions of the Master Direction dated 1 January 2016 on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers.
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