• Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures (FCD’s) and compulsorily and mandatorily convertible preference shares (CCPS) to non residents subject to pricing guidelines/valuation norms prescribed under FEMA. It has been specifically clarified that for FCD’s CCPS, pricing of the instruments would need to be decided determined upfront at the time of issue of these instruments.
• Also, issue of warrants, partly paid shares, etc. are not considered as capital and hence cannot be issued to a person resident outside India, without obtaining prior approval of Foreign Investment Promotion Board (FIPB).
• Issue of non‐convertible, optionally convertible or partially convertible preference shares/ debentures would need to comply the External Commercial Borrowing (ECB) Guide‐lines. Since these instruments are denominated in Rupees, the rupee interest rate will be based on the swap equivalent of London Interbank offered Rate (LIBOR) plus the spread permissible for ECBs of corresponding maturity.
• It has been clarified that prior approval of FIPB followed by permission from RBI would be required for transfer of equity shares/FCD’s/CCPS, from residents to non residents by way of sale or otherwise, if the Indian company is engaged in any sectors falling under the Government route.
• Prior permission from RBI would also be required if the transfer of equity shares/FCD’s/CCPS, from residents to non residents, by way of sale is at a price which is not in accordance with the pricing guidelines specified by RBI; and also for transfer where the non‐resident acquirer proposes deferment of payment of the amount of consideration.
• Prior permission from RBI would also be required if the transfer of equity shares/FCD’s/ CCPS from residents to non residents of an Indian company engaged in financial services sector.
• FCCBs and DRs will be treated as FDI (but not included in definition of “capital”).
• FDI in Trusts is not permitted, with the exception of Venture Capital Funds registered with SEBI.

Sectoral caps and conditions

Cash and Carry Wholesale Trading: Government has defined the term‘Cash and Carry Wholesale Trading’ Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex‐port/exbonded warehouse business sales and B2B e‐Commerce. Conditions have been prescribed for undertaking wholesale cash and carry trading activities like (i) Requisite licenses/ registration/permits, as prescribed by the State Government should be obtained.

Wholesale Trading (WT) of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture and the wholesale made to the group companies should be for their internal use only.

Addition to Sectors with FDI Cap