In a recent move, the Government of India has decided to adopt a new policy in respect of foreign investments in infrastructure companies in the securities market. The Reserve Bank of India alongwith the Securities and Exchange Board of India (SEBI) have vide their Circulars dated 22nd December 2006 permitted foreign investment upto 49% in infrastructure companies in the securities market namely stock exchanges, depositories, and clearing corporations in compliance with SEBI Regulations.
The foreign shareholding of 49% in stock exchanges, depositories and clearing corporations would be subject to a sub-ceiling of 26% for Foreign Direct Investment (FDI) and 23% for Foreign Institutional Investment (FIIs). FDI in such infrastructure companies will be allowed only with prior approval of the Foreign Investment Promotion Board.
Investment of 23% by FIIs in such infrastructure companies would be permitted only through purchases in the secondary market and FIIs would not be entitled to any board representation. No foreign investor, including persons acting in concert, would be entitled to hold more than 5% of the equity in such infrastructure companies.
The foreign investment in respect of stock exchanges shall be subject to a limit of 5% shareholding by any person, directly or indirectly as prescribed under the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognized Stock Exchanges) Regulations, 2006.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
