The Foreign Investment Promotion Board has decided to reject proposals from companies seeking to issue partly paid-up equity shares to foreign investors.

It has rejected a proposal by Subash Chandra-promoted Wire and Wireless India, which has sought permission to issue partly paid-up equity shares, pursuant to its rights issue.

WWIL is in the cable network business. The shares were to be issued to non-residents, which also included FIIs, venture capital funds, multilateral and bilateral development financial institutions, and eligible NRIs for cash aggregating up to Rs 450 crore (Rs 4.5 billion).

The company had informed that it has a foreign shareholding of 23.12 per cent, which includes 12.11 per cent by FIIs registered with Sebi.

The FIPB in its deliberations observed that the proposal involves issue of partly paid-up equity shares, which, though allowed under the Companies Act, is not envisaged in the FDI guidelines.

It pointed out that 'issue of partly paid-up equity shares need not be encouraged, keeping in view the spirit of FDI'.

It accordingly deliberated and recommended the proposal for rejection despite the fact that the department of economic affairs had no objection to the proposal, provided it was in accordance with Fema and Sebi guidelines.

Even the information & broadcasting ministry said it had no objection to the proposal.

The Subhash Chandra-owned company has, however, appealed to the FIPB to have a fresh look at the proposal. The company has been given prior approval to take up to 49 per cent foreign direct equity.

The money, which is being raised, will be used for repayment of some loans, funding working capital requirement and also funding the cost of acquisition of multi system operators and local cable operators.