INDIA: India Foreign investors permitted to acquire shares in accordance with the India Takeover Regulations

Tuesday September 10 2013

The Reserve Bank of India has announced that it is liberalising the rules applicable to non-residents when acquiring shares under the Foreign Direct Investment route with the India takeover regulations. It has been decided that a non resident (including a Non Resident Indian) may acquire shares of a listed Indian company on the stock exchange through a registered broker under the FDI scheme provided that:

i. The non-resident investor has already acquired and continues to hold the control in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations;

ii. The amount of consideration for transfer of shares to non-resident consequent to purchase on the stock exchange may be paid:

• by way of inward remittance through normal banking channels, or
• by way of debit to the NRE/FCNR account of the person concerned maintained with an authorised dealer/bank;
• by debit to non-interest bearing Escrow account (in Indian Rupees) maintained in India with the AD bank in accordance with Foreign Exchange Management (Deposit) Regulations, 2000;
• the consideration amount may also be paid out of the dividend payable by Indian investee company, in which the said non-resident holds control as (i) above, provided the right to receive dividend is established and the dividend amount has been credited to specially designated non –interest bearing rupee account for acquisition of shares on the floor of stock exchange.

iii. The pricing for subsequent transfer of shares to non-resident shareholder shall be in accordance with the pricing guidelines under FEMA;

iv. The original and resultant investments are in line with the extant FDI policy and FEMA regulations in respect of sectoral cap, entry route, reporting requirement, documentation, etc.

Click on the above link for the RBI notification.