• An Indian company which proposes to undertake activities or manufacture items in Annexure B is permitted to issue shares or convertible debentures to persons resident outside India out of fresh capital to be issued for financing expansion programme for carrying on such activities, subject to compliance with the provisions of paragraph (i) above.

• A trading company is permitted to issue shares/ convertible debentures to the extent of 51 per cent of its capital, to persons resident outside India. The remittance of dividend on such shares would be permissible when the company has secured registration as an Export/ Trading/ Star Trading/Super Trading House.

• A small scale industrial (SSI) Unit which is not engaged in any activity or imanufacture of items included in Annexure A, may issue shares or convertible debentures to non-residents up to 24% of its paid-up capital. Such a company may issue shares beyond 24% subject to ceilings specified in Annexure B if- (a) it has given up its SSI status; (b) it is not engaged or does not propose to engage in manufacture of items reserved for SSI sector;

• Export Oriented Units or Units in Free Trade Zone or in Export Processing Zone or in Software Technology Parks in Electronic Hardware Technology Park are permitted to issue shares or convertible debentures to persons resident outside India beyond 24 per cent subject to compliance with ceilings specified in Annexure B.

• Issue of shares by an Indian company to a person resident outside India which are not covered by the provisions of above paragraphs would require approval of SIA/FIPB.

• The price of shares issued to persons resident outside India shall not be less than- (a) the price worked out in accordance with SEBI guidelines, where the issuing company is listed on any recognised stock exchange in India, and (b) fair valuation of shares done by a chartered accountant as per the guidelines issued by the erstwhile Controller of Capital Issues, in all other cases.

• The rate of dividend on preference shares issued by an Indian company to a person resident outside India should not exceed 300 basis points over the Prime Lending Rate of State Bank of India prevailing as on the date of the Board meeting of the company in which issue of such shares is recommended.

• A company in India issuing shares or convertible debentures to a person resident outside India shall receive the amount of consideration for such shares either by way of inward remittance through normal banking channels, or out of funds held in NRE/FCNR accounts of the NRI/OCB investor.

• An Indian company issuing shares or convertible debentures shall submit to Reserve Bank,

  • Not later than 30 days from the date of receipt of the amount of consideration, a report indicating :-

  • Name and address of the foreign investors

  • Date of receipt of funds and their rupee equivalent

  • Name and address of the authorized dealer through whom the funds have been received, and

Details of the Government approval, if any;

• Not later than 30 days from the date of issue of shares, a report in Form FC-GPR together with,

• a certificate from the Company Secretary of the company accepting investment from persons resident outside India certifying that

• all the requirements of the Companies Act, 1956 have been complied with;

• terms and conditions of the Government approval, if any, have been complied with;

• the company is eligible to issue shares under these Regulations; and

• the company has all original certificates issued by authorized dealers in India evidencing receipt of amount of consideration in accordance with paragraph 9;

a certificate from Statutory Auditors or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.

• Reserve Bank’s permission is necessary for retention abroad of share subscription amount received by Indian company issuing shares, from non-residents.

• There are no separate schemes for NRIs/OCBs for direct investment in India on repatriation basis. NRIs/OCBs are now on par with any other foreign investor and they may invest in the shares/convertible debentures issued by an Indian company under the Foreign Direct Scheme.

ANNEXURE A

List of activities or items for which automatic route of Reserve Bank for Investment from persons Resident Outside India is not available

1. Banking
2. NBFC’s activities in Financial Services Sector
3. Civil Aviation
4. Petroleum including exploration/refinery/marketing
5. Housing & Real Estate Development sector for investment from persons other than NRIs/OCBs.
6. Venture Capital Fund & Venture Capital Company
7. Investing companies in Infrastructure & Service Sector
8. Atomic Energy & related projects
9. Defence and strategic industries
10. Agriculture (including plantation)
11. Print Media
12. Broadcasting
13. Postal services