Defence equipment makers in demand

Shares of six defence equipment makers rose by 4.06% to 5.08% at 9:35 IST on BSE after the government notified increase in foreign direct investment limit to 49% through approval route in the defence sector.

Bharat Electronics (up 5.08%), BEML (up 4.99%), Astra Microwave Products (up 4.63%), Dynamatic Technologies (up 4.54%), Walchandnagar Industries (up 4.24%) and Pipavav Defence & Offshore Engineering Company (up 4.06%), edged higher.

The S&P BSE Sensex was up 122.44 points, or 0.46% at 26,565.25.

The Department of Industrial Policy and Promotion (DIPP) yesterday, 26 August 2014, notified increase in foreign direct investment (FDI) limit to 49% from 26% in the defence sector. The FDI limit of 49% is a composite ceiling. It includes all kinds of foreign investments such as FDI, Foreign Institutional Investors (FIIs), Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs), Foreign Venture Capital Investors (FVCI) and Qualified Foreign Investors (QFIs). Portfolio investment by FPIs, FIIs, NRIs, QFIs and investments by FVCIs has been capped at 24% of the total equity of the investee or joint venture company.

The applicant company seeking permission of the government for FDI up to 49% in defence sector should be an Indian company owned and controlled by resident Indian citizens. The management of the applicant company should be in Indian hands.

Foreign direct investment proposals in the defence sector above 49% will have to seek the approval of the Cabinet Committee on Security on case to case basis, wherever it is likely to result in access to modern and state of the art technology in the country, according to the press note of DIPP.

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