For regulating debt flows into the country, government is likely to come out with a list of hybrid instruments next month, which Indian companies will be able to issue for raising foreign direct investment. Economic Affairs Secretary Das has said that they have completed their deliberation and in next 2-3 weeks they will be coming out with the some new policy initiatives with regard to the hybrid instruments which will get the status of FDI. Das further added, hybrid instruments include optionally convertible or partially convertible debentures, Foreign Currency Convertible Bonds which are intrinsically debt-instruments.
As of now, only instruments which are fully and mandatorily convertible into equity, within a specified time would be reckoned as part of equity under the FDI Policy and eligible to be issued to person’s resident outside India under the Foreign Direct Investment Scheme. Besides equity investment, FDI capital means fully, compulsorily and mandatorily convertible preference shares; fully, compulsorily and mandatorily convertible debentures and warrants.
Finance Minister Arun Jaitley had announced in last Budget that a basket of eligible instruments would be brought in to include hybrid instruments that will expand the scope of instruments that foreigners now use to invest in India. In the past two years, the government has taken a series reform measures to liberalize the FDI regime and recently announced FDI liberalization in nine sectors such as civil aviation, retail and private security services.