Warrants: 25 per cent upfront payment must for foreigners

Market regulator Sebi has notified new norms that will make it mandatory for Indian firms to collect at least 25 per cent as upfront payment from foreign investors, who are issued warrants of the company.
As per the changed norms, a domestic company would collect at least 25 percent of the total amount while issuing warrants to overseas entities.
This would be applicable for such securities issued by way of public offer or rights issue.
"The price or conversion formula of the warrants shall be determined upfront and at least 25 per cent of the consideration amount shall also be received upfront," the Securities and Exchange Board of India (Sebi) said in a notification.

"In case the warrant holder does not exercise the option to take equity shares against any of the warrants held by him, the consideration paid in respect of such warrant shall be forfeited by the issuer," it added.
In respect of warrants issued along with public or rights issue of specified securities, 25 of the consideration would be received upfront by the issuer and tenure of such warrants would be 18 months as against 12 months presently.
The new norms has comes in order to harmonize the norms on receipt of upfront payment and tenure of partly paid shares or warrants between the Sebi Issue of Capital Disclosure Regulations (ICDR) regulations and Foreign Exchange Management Act (FEMA).

Earlier, the board of market regulator had approved the regulations in January 2015. Sebi's approval came after Reserve Bank of India (RBI) in July allowed foreign investors to invest in partly-paid shares and warrants of Indian companies.