No prior approval for preference shares, warrants: Reports

India Infoline News Service | Mumbai |

The proposal has been endorsed by the Reserve Bank of India, SEBI (Securities and Exchange Board of India) and the finance ministry

Companies issuing preference shares and warrants to foreign investors will soon not require prior approval from the Foreign Investment Promotion Board (FIPB), according to a media report.

The relaxation is expected to encourage merger & acquisition activity and enhance foreign investments in the country.

The relaxation will be available to all sectors in which foreign direct investment is allowed on the automatic route, the report added.


The proposal has been endorsed by the Reserve Bank of India, SEBI (Securities and Exchange Board of India) and the finance ministry, the report further said.


Preference shares are shares in a company which give their holders an entitlement to a fixed dividend but which do not usually carry voting rights. Preference shareholders get a fixed dividend which, if not paid, usually accrues until it can be.


Company warrants are securities issued by a company, usually during fresh offer of shares. The company issues warrants to raise capital/funds for itself. Warrants give investors an option to diversify their portfolio. Issued in the form of certificates, warrants give investors the right to buy shares in the company at a specific price at a future date.

Companies generally offer warrants to attract investors. Warrant holders can convert their warrant certificates into underlying equity shares of the company within a given time period. Value of a warrant depends on the value of the ordinary share which is the underlying security.



 

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