Firms using call & put option to beat FDI cap under lens

NEW DELHI: The government is examining the alleged misuse of call & put option by foreign investors to indirectly hold stakes in companies operating in sectors that have FDI cap.
Many domestic companies in the insurance, telecom and a few other sectors — which have a cap on foreign investment — have issued shares to foreign investors with a call & put option. This allows the domestic investor to sell to the foreign strategic partner (the put option) if and when the FDI limit changes. Foreign investors also have the right to buy, which is the call option.

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