Defence Stocks Rise On FEMA Notification For 74% FDI Via Automatic Route

Shares of defence equipment makers gained after the government issued a notification regarding changes in the Foreign Exchange Management Act allowing FDI of up to 74% in such production through automatic route.

• Bharat Electronics Ltd. rose as much as 7.7% to Rs 121.9 apiece—the highest since Nov. 4, 2019.
• Hindustan Aeronautics Ltd. gained as much as 3.3% to Rs 892.35 apiece—the highest since Sept. 8, 2020.
• Bharat Dynamics Ltd. rose as much as 4.4% to Rs 356.25 apiece—the highest since Sept. 7, 2020.

The Commerce Ministry in September had raised the FDI in defence through the automatic route to 74% from 49%.

Some conditions highlighted in the notification:

• FDI up to 74% under automatic route shall be permitted for companies seeking new industrial licences.
• Infusion of fresh foreign investment up to 49% in a company not seeking industrial licence or which already has government approval for FDI in defence shall submit a declaration with the Ministry of Defence in case of change or transfer of stake to a new investor.
• Licence applications will be considered by the DPIIT, Commerce Ministry, in consultation with the Ministry of Defence and Ministry of External Affairs.
• Foreign investment in the sector shall be subject to security clearance by the Ministry of Home Affairs and as per Defence Ministry guidelines.