(i) Applications for transfer of shares by non-resident investors to residents should be made to the concerned Regional Office of Reserve Bank under whose jurisdiction the Head/Registered Office of the company, whose shares are to be transferred, is situated, in form TS 1 together with the documents mentioned therein. These applications will be considered by Reserve Bank in accordance with the following guidelines:

(a) In case the shares to be transferred are traded on Stock Exchange, Reserve Bank will permit such transfers provided the sale is made at the prevailing market price on stock exchange/s through a registered merchant banker or a stock broker.

(b) In the case of transfer of shares by private arrangement (i.e. other than through stock exchange) to a resident, Reserve Bank will satisfy itself that the shares are proposed to be sold at a price arrived at by taking the average quotations (average of daily high and low) for one week preceding the date of application with ñ 5 per cent variation. However, if the disinvestment of shares is by the foreign collaborators/promoters of the Indian company in favour of existing Indian promoters with the objective of passing management control in favour of the resident promoters, the proposal will be considered by Reserve Bank at a price which is higher by up to a ceiling of 25% over the price arrived at as above.

(c) Applications for disinvestment of unlisted/thinly traded shares by non-residents to residents for gross consideration upto Rs.20 lakhs per seller, per company, per annum, will be cleared at mutually agreed price based on any valuation methodology currently in vogue. In respect of transactions exceeding Rs.20 lakhs the non-resident seller will have the following options:

(i) To sell the shares with prior approval of Reserve Bank at higher of the price based on Earning Per Share (EPS) linked to the Price Earning (P/E) multiple and that based on the Net Asset Value (NAV) linked to Book Value (BV) multiple. The NAV per share may be calculated by subtracting the miscellaneous expenses carried forward, accumulated losses, total outside liabilities, revaluation reserves and capital reserves except subsidy received in cash, from the total assets and then dividing the amount of net assets thus arrived at by the number of equity shares. Alternatively, intangible assets may be subtracted from the equity capital and reserves (excluding revaluation reserves) and the figure so arrived at should be divided by the number of equity shares. For computing the price based on EPS, the earning per share as per the latest audited balance sheet of the company will be used in conjunction with the average P/E multiple of Bombay Stock Exchange National Index (BSEN) for the calendar month immediately preceding the month in which the application is made. The P/E multiple will be discounted by 40 per cent. Similarly, for computing price based on Net Asset Value, the NAV per share calculated as above will be used in conjunction with the average BV multiple of BSEN during the calendar month immediately preceding the month in which application is made. The BV multiple will be discounted by 40 per cent.

(ii) To sell the thinly traded shares, with the prior approval of Reserve Bank, on stock exchange at the prevailing market price in small lots so that the entire holding is sold in not less than five trading days through screen based trading system.

(iii) To sell the shares, with the prior approval of Reserve Bank, at a price which is lower of the two independent valuations, one by the statutory auditors and the other by a Chartered Accountant or SEBI registered category-I merchant banker, giving a reasoned report in respect of the price.

A share/security will be considered as thinly traded if on the main exchange(s) in India, the annualised trading turnover in that share/security during the preceding six calendar months prior to the month in which the application is submitted, is less than 2 per cent (by number of shares) of the listed stock. For this purpose, the weighted average of the number of shares listed during the said six months period may be taken. In cases of securities with a history of listing and trading of less than six months, the trading turnover may be annualised with reference to the actual number of days for which the stock has been listed.

(ii) In the case of sale of shares of Indian companies listed on a stock exchange in India, the application may be submitted by the transferor or his attorney. Applications for sale/transfer of shares by private arrangement (i.e. other than through stock exchange), may, however, be made either by the transferor or the transferee with a copy of letter of consent for the sale/transfer from other party. While conveying its approval, Reserve Bank will stipulate the conditions subject to which the sale/transfer should be effected.

NOTE: Transfer of Indian shares and securities standing in the names of persons resident in Nepal to persons resident in India is also subject to the regulations laid down in the above paragraph