The Reserve Bank of India (RBI) has issued Notification no. FEMA 205/2010-RB dated 7 April 2010 (Notification), which has amended the regulation in connection with pricing norms for issue of shares by an Indian company to a person resident outside India. This Notification comes into force from 21 April 2010 (i.e. the date of its publication in the Official Gazette). Given below are the amended pricing norms for rights issue and issue of shares (other than rights issue).
| Type of Indian company | Pricing Norms |
| Company not listed on a recognized stock exchange in India | At a price not less than the price at which the shares are issued to resident shareholders |
| Company listed on a recognized stock exchange in India | At a price not less than the price determined in accordance with Securities Exchange Board of India
(SEBI) guidelines |
| Company (public or private) not listed on a recognized stock exchange in India | At a price not be less than the fair valuation of shares done by
The above valuation will be done as per the Discounted Free Cash Flow Method |
| Preferential allotment of shares by a company | At a price not less than the price determined as per the RBI pricing guidelines |
Comments
- The Notification does not clarify whether the new guidelines would apply to share application monies received, pending the allotment of shares on 21 April 2010.
- It is unclear whether the SEBI or the RBI pricing guidelines will apply in case of preferential allotment by a listed public company
The above issues could be clarified by an RBI circular.
Download Notification no. FEMA 205/2010-RB dated 7 April 2010
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