Govt allows FDI equity against imported machines | business | Hindustan Times
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Govt allows FDI equity against imported machines

The government on Thursday relaxed the rules for foreign direct investment (FDI) in the country, allowing the issuance of equity to overseas firms against imported capital goods and machinery.

business Updated: Mar 31, 2011 22:09 IST
HT Correspondent

The government on Thursday relaxed the rules for foreign direct investment (FDI) in the country, allowing the issuance of equity to overseas firms against imported capital goods and machinery.

“After stakeholder consultations, the government has now decided to permit issue of equity, under the government route, in... import of capital goods, machinery, equipment (including second-hand machinery),” an official statement said.
This will allow conversion of non-cash items into equity.

The guidelines relating to down-stream investments have also been comprehensively simplified and rationalised.

Companies have now been classified into only two categories – ‘companies owned or controlled by foreign investors’ and ‘companies owned and controlled by Indian residents’. The earlier categorisation of ‘investing companies’, ‘operating companies’ and ‘investing-cum-operating companies’ has been done away with.

Besides, the new circular also changes the norms of pricing of convertible instruments.

Instead of specifying the price of convertible instruments upfront, companies will now have the option of prescribing a conversion formula, subject to the Securities and Exchange Board of India’s (SEBI’s) guidelines on pricing.

“This would help the recipient companies in obtaining a better valuation based upon their performance,” a press statement said.

In the agriculture sector, FDI will now be permitted in the development and production of seeds and planting material, without the stipulation of having to do so under ‘controlled conditions’.