Indian companies in FDI-prohibited sectors can issue bonus shares to existing foreign investors, subject to conditions.
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Government on Monday permitted Indian companies operating in FDI-prohibited sectors can issue bonus shares to existing foreign investors.

“An Indian company engaged in sector/activity prohibited for FDI is permitted to issue bonus shares to its pre-existing non-resident shareholders,” latest press note, dated April 07, said. However, this relaxation will be with a condition and that says that shareholding pattern of the pre-existing non-resident shareholders does not change pursuant to the issuance of bonus shares.

As per the consolidated FDI Policy Circular of 2020, Indian companies are permitted to issue bonus shares to existing non-resident shareholders subject to adherence to sectoral cap. The latest press note is a clarification to the said circular.

Sandeep Sehgal, Partner-Tax, AKM Global said, “The clarification for allowing the issuance of bonus shares to existing non-resident shareholders even in sectors where there are sectoral caps provides the much-needed flexibility.” Further, this move will enable companies to reward their international investors without altering the ownership structure or breaching FDI, he added.

Published on April 7, 2025

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