ITC to benefit as govt eases FDI norms for 'prohibited' sectors

THE GOVERNMENT HAS allowed domestic companies that are operating in areas where foreign direct investment (FDI) is prohibited to issue bonus shares to its existing foreign shareholders with the condition that it does lead to an increase in their stake in the company.

- FE BUREAU

ITC will get a leeway with the clarification. British American Tobacco (BAT), which holds a 25.5% stake in ITC, could now be issued bonus shares subject to the equity cap.

"The basis of the clarification seems to be the fact that a bonus issuance does not entail any inflows of funds.

"This clarification will allow such Indian companies to effectively capitalise their existing reserves and provide another avenue for cash distribution to their existing shareholders — both foreign and Indian," senior partner at Saraf and Partners, Vaibhav Kakkar said.