‘Capital Instruments’ means monetary instruments in capital markets such as equity shares, debentures, preference shares and share warrants issued by a company. Indian companies are permitted to raise money by way of capital instruments for their operational purposes.
The instruments issued in capital markets are listed below:
Equity shares: Equity shares are the shares joint-stock companies issue to the public as the main source of long-term financing. The company which issues equity shares gives investors the right to vote, share profits and claim on assets. These shares cannot be redeemed by the shareholders; they can only be transferred from one person to another. Share prices are set by supply and demand in the market as buyers and sellers place orders. Click: ‘equity share’ for more details
Share warrants: Share warrant is an option issued by the company that gives the warrant holder a right to subscribe to equity shares at a pre-determined price on or after a pre- determined time period. Share warrants issued on or after July 8, 2014, are considered as capital instruments.
Debentures: Foreign Investments in fully, compulsorily, and mandatorily convertible debentures are permitted in any sector except those sectors that are prohibited. FDI route cannot be utilized to make debt investments. To know more read: “convertible debenture”
Preference shares: ‘Preference’ shares in terms of Capital instrument used by foreign investors mean fully, compulsorily and mandatorily convertible preference shares as per FEMA guidelines. To know more.. Click preferential shares to know more about preferential shares.