Regulation 11 - Pricing Guidelines - Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017

11. Pricing Guidelines Unless otherwise specified in these Regulations or the relevant Schedules, the price of capital instruments of an Indian company - (1) issued by such company to a person resident outside India shall not be less than: (a) the price worked out in accordance with the relevant Securities and Exchange Board of India guidelines in case of a listed Indian company or in case of a company going through a delisting process as per the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; (b) the valuation of capital instruments done as per any internationally accepted pricing methodology for valuation on an arm s length basis duly certified by a Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant, in case of an unlisted Indian Company. Explanation: in case of convertible capital instruments, the price/ conversion formula of the instrument should be determined upfront at the time of issue of the instrument. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such instruments, in accordance with these Regulations. (2) transferred from a person resident in India to a person resident outside India shall not be less than: (a) the price worked out in accordance with the relevant Securities and Exchange Board of India guidelines in case of a listed Indian company; (b) the price at which a preferential allotment of shares can be made under the Securities and Exchange Board of India Guidelines, as applicable, in case of a listed Indian company or in case of a company going through a delisting process as per the Securities and Exchange Board of India (Delisting of Equity Shares) regulations, 2009; (c) the valuation of capital instruments done as per any internationally accepted pricing methodology for valuation on an arm s length basis duly certified by a Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant, in case of an unlisted Indian Company. (3) transferred by a person resident outside India to a person resident in India shall not exceed: (a) the price worked out in accordance with the relevant Securities and Exchange Board of India guidelines in case of a listed Indian company; (b) the price at which a preferential allotment of shares can be made under the Securities and Exchange Board of India Guidelines, as applicable, in case of a listed Indian company or in case of a company going through a delisting process as per the Securities and Exchange Board of India (Delisting of Equity Shares) regulations, 2009; Provided that the price is determined for such duration as specified in the Securities and Exchange Board of India Guidelines, preceding the relevant date, which shall be the date of purchase or sale of shares; (c) the valuation of capital instruments done as per any internationally accepted pricing methodology for valuation on an arm s length basis duly certified by a Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant, in case of an unlisted Indian Company. Explanation: The guiding principle would be that the person resident outside India is not guaranteed any assured exit price at the time of making such investment/ agreement and shall exit at the price prevailing at the time of exit. (4) in case of swap of capital instruments, subject to the condition that irrespective of the amount, valuation involved in the swap arrangement will have to be made by a Merchant Banker registered with Securities and Exchange Board of India or an Investment Banker outside India registered with the appropriate regulatory authority in the host country. (5) where shares in an Indian company are issued to a person resident outside India in compliance with the provisions of the Companies Act, 2013, by way of subscription to Memorandum of Association, such investments shall be made at face value subject to entry route and sectoral caps. (6) in case of share warrants, their pricing and the price/ conversion formula shall be determined upfront. Provided these pricing guidelines shall not be applicable for investment in capital instruments by a person resident outside India on non-repatriation basis.