Govt clarifies on issuance of bonus shares to existing foreign investors

New Delhi: The government has clarified that an Indian firm engaged in a sector where FDI is prohibited can issue bonus shares to pre-existing foreign shareholders, provided there is no change in shareholding pattern. The issuance of bonus shares must comply with the applicable rules, laws, regulations, the DPIIT said.

“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,” according to the DPIIT’s clarification which is inserted in the FDI policy.

FDI in the country is allowed via the automatic route in most of the sectors, while in areas like telecom, media, pharmaceuticals and insurance, government approval is required for foreign investors. However, in some sensitive sectors, overseas investments are also banned.

Under govt approval route, a foreign investor has to take nod of the ministry or department concerned, whereas under the automatic route, an overseas investor is only required to inform the RBI after the investment is made.