RBI, through a recent notification, reviewed what instruments would be permissible means of foreign investment. FIIs and Registered FPIs can now invest in partly paid-up equity shares and warrants as part of FDI and FPI, subject to applicable sectoral caps.

Partly paid-up Equity shares: The pricing is required to be determined upfront and 25% of the total consideration is to be received by the issuer upfront. The balance consideration is required to be received within a period of 12 months. In case of listed companies, if the issue size exceeds five hundred crores and the issuer complies with Regulation 17 of the ICDR Regulations, the 12 month requirement will not be insisted upon.

In case of unlisted companies, if the consideration amount exceeds five hundred crores (Rs. 5 billion), the 12 month requirement will not be attracted as long as issuer appoints a monitoring agency on similar lines as required by ICDR Regulations of SEBI for listed companies.

Partly paid-up Warrants: The pricing or the price/conversion formula of the warrants shall be determined upfront and 25% of the consideration amount shall be received upfront. The balance consideration shall be received within a period of 18 months. It is also necessary to ensure that the price of the warrants at the time of conversion shall not be less than the fair value computed at the time of issuance in accordance with the extant FEMA Regulations and pricing guidelines stipulated by RBI.

These measures provide additional flexibility and options to Indian companies in raising foreign capital.