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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).
The pricing in regard to issue and transfer of shares to non-residents were governed by the CCI guidelines. Theses have been replaced with the discounted cash flow method which is based on the future earnings. However, RBI has made a distinction in pricing with respect to issue of shares on preferential basis as compared to normal issue as the same would be covered by the RBI guidelines to be prescribed.
Price of shares issued to persons resident outside India under this Schedule, shall not be less than – (a) the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company is listed on any recognised stock exchange in India;(b) the fair valuation of shares done by a SEBI registered Category – I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method, where the shares of the company is not listed on any recognised stock exchange in India ; and
Favours check on downstream investments by firms with minority foreign shareholding. The finance ministry has proposed to tighten the foreign direct investment (FDI) regime in the country. It has sought to route a larger number of investments by companies where the foreign stakeholding is less than 50 per cent through the Foreign Investment Promotion Board (FIPB).
The Circular is a convenient compendium of the FDI Policy of the Government of India. Some of the salient features highlighted in this alert reflect changes in interpretation of FDI Policy which have now been clarified. Also clearer guidance has been provided with regard to the intent of the FDI policy. It is likely that some of these changes may have an impact on existing foreign investments, which would need to be reviewed on a case specific basis.
Internet-based money transfer service Paypal has resumed remittances to small-time exporters who will now have to report them as export revenue to Indian authorities. “Customers who rely on PayPal are now able to sell their goods and services around the world and withdraw money to their local bank accounts,” explained Anuj Nayar, director of global communications, PayPal.
The relief sought for by the petitioner seeking permission to be accompanied by an advocate of his choice when he appears before the Enforcement Directorate in pursuance of the summons issued under section 37 of the Foreign Exchange Management Act, 1999 and recording of statement in the presence of an advocate
Presently, the recommendations of the FIPB on these proposals with total investment up to Rs.600 crore are considered by the Finance Minister and those exceeding this amount, by the Cabinet Committee on Economic Affairs (CCEA). Prior to 18.2.2003, proposals of more than Rs.600 crore were to be approved by the Cabinet Committee on Foreign Investment (CCFI).
The commerce and industry ministry has recommended a ban on foreign direct investment in cigarette manufacturing and allied products involving tobacco, an official said. “We have sent the note to ban FDI in cigarette manufacturing and allied products to the Cabinet and it is expected to be taken up soon,” the official said.
Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to Notification No.FEMA 29/2000-RB dated September 26, 2000 viz. Payment to person resident outside India on invocation of guarantee, A.P. (DIR Series) Circular No. 28 dated March 30, 2001 and A.P. (DIR Series) Circular No. 5 dated August 1, 2005 relating to External Commercial Borrowings (ECB).
