Foreign Investments in India

Correct Answer : Option d

Foreign Investment means any investment made by a ‘person’ resident outside India in ‘capital instruments’ of an Indian company. Person means foreign individuals, NRIs, companies etc.

Depository Receipts (DRs): DRs are negotiable securities issued outside India by a depository bank on behalf of an Indian company, representing the company's equity shares. They enable foreign investors to hold shares in Indian companies and are traded on international stock exchanges.

Equity shares: Equity shares represent ownership of the company and voting rights. Preference shares (fully, compulsorily and mandatorily convertible preference shares): They have preferential rights over dividend and to repayment of the capital in the case of a winding-up of the company. They must be converted into (common) equity shares after some time.

Compulsorily Convertible Debentures(CCD): A CCD is a type of bond which must be converted into stock by a specified date. It is classified as a hybrid security, as it is neither purely a bond nor purely a stock.

Share Warrants: Share warrant is a document issued by the company to the investor that gives the warrant holder (investor) a right to subscribe to equity shares of the company at a predetermined price on or after a predetermined time period. The warrant holder is given a right but not an obligation to subscribe equity shares. If the warrant holder does not exercise his option to subscribe to equity shares, then the initial amount (some percent of the total amount paid by the warrant holder to purchase the warrant) paid stands forfeited.