Indian Firms In FDI-Prohibited Sectors Allowed To Issue Bonus Shares To Foreign Investors

New Delhi, Apr 9 (KNN) The Department for Promotion of Industry and Internal Trade (DPIIT) has issued a clarification stating that Indian companies operating in sectors where Foreign Direct Investment (FDI) is prohibited can issue bonus shares to their existing non-resident shareholders, provided there is no change in the shareholding pattern.

According to the clarification now inserted in the FDI policy, "An Indian company engaged in a sector/activity prohibited for FDI is permitted to issue bonus shares to its pre-existing non-resident shareholders provided that the shareholding pattern of the non-resident shareholder does not change pursuant to the issuance of bonus shares."

The DPIIT emphasised that such issuances must comply with all applicable rules, laws, regulations, and guidelines.

This clarification specifically addresses questions regarding the permissibility of bonus share issuance to existing foreign shareholders by Indian companies operating in sectors where FDI is otherwise prohibited.

India currently allows FDI through the automatic route in most sectors, while investments in sensitive areas such as telecom, media, pharmaceuticals, and insurance require government approval.

Some particularly sensitive sectors remain completely closed to foreign investment. Under the government approval route, foreign investors must obtain prior permission from the relevant ministry or department, whereas the automatic route only requires notification to the Reserve Bank of India (RBI) after the investment is made.

(KNN Bureau)