The Centre has not closed the window for issuing warrants and partly-paid shares to non-residents even as the recently announced consolidated FDI policy framework excluded these instruments from the definition of “capital”, a senior Government official said.
“It’s not that it (issuing warrants and partly paid shares to non-residents) is totally closed. FIPB is considering them on a case-to-case basis. The intent behind the exclusion (from definition of capital) was only to reflect the FDI policy as it exists today,” Mr Deepak Narain, Director, Department of Industrial Policy and Promotion (DIPP), told an Assocham seminar on “International fund raising – issues and options” here on Monday.
Definition :He was responding to queries raised by industry representatives on whether the explicit exclusion of warrants or partly-paid shares from the definition of capital would imply that this route of fund raising would not be available for domestic industry.
The Department of Industrial Policy and Promotion circular on the consolidated FDI policy framework specified that warrants and partly-paid shares “cannot be issued to a person resident outside India”.
A senior RBI official later told reporters at the meeting that warrants and partly-paid shares are not recognised instruments under the FEMA law for bringing investments under the automatic route.
While the policy intent is to discourage use of warrants or partly-paid instruments, it is not that the window is totally closed, officials said.
The consolidated foreign direct investment policy framework had also changed the basis of ownership test for foreign investments from “equity interest” to capital.
Clarification:-Mr Narain also said that DIPP would soon issue clarifications on definition of a “group company” for the purpose of the wholesale trading norms. “It is likely to come in the next two months,” he later told reporters. The wholesale trading norms have put a turnover cap (25 per cent) on sales by a wholesale venture within its Group
Also, the DIPP is likely to release the remaining five discussion papers on FDI policy by September this year, Mr Narain said.
A paper on opening up of the defence sector for foreign direct investment has already been released.