Changing world of corporate finance

Thus, as per the original September 1992 policy permitting foreign institutional investment, registered FIIs could individually invest in a maximum of 5 per cent of a company s issued capital and all FIIs together up to a maximum of 24 per cent. But much relaxations have occurred since. The 5 per cent individual-FII limit was raised to 10 per cent in June 1998.

Further, as of March 2001, FIIs as a group were allowed to invest in excess of 24 per cent and up to 40 per cent of the paid-up capital of a company with the approval of the general body of the shareholders granted through a special resolution. This aggregate FII limit was raised to the sectoral cap for foreign investment in the concerned sector as of September 2001.

These changes, obviously, substantially expanded the role that foreign financial investors could play in the market for corporate equity.