Govt allows FDI through partly paid shares

In order to attract more foreign direct investment in the country, the government has permitted foreign investments through partly paid shares and warrants.

Partly paid shares are those which have been bought but for which the company has allowed shareholders to pay only part of the total value.

“The government has reviewed the provisions of the extant FDI policy. It has been decided to allow partly paid shares and warrants as eligible capital instruments for the purposes of FDI policy,” the Department of Industrial Policy and Promotion (DIPP) said in a notification. It also clarified that the facility sharing agreements within the two group companies will not be treated as real estate business provided the arrangements are at arm’s length price.

The government has taken many measures including composite caps resulting in uniformity and simplicity across the sectors in FDI Policy. Before the amendments in the Consolidated FDI Policy, these sectors had sub-limits within an overall cap. Different categories of caps lead to a situation where the person who is investing and the person receiving the investment got confused and had to be more careful that he did not exceed the limit. During April-June quarter of this fiscal, FDI grew by 31 per cent to $9.50 billion.