Space stocks jump up to 7% after government approves 100% FDI

Space-related stocks soared up to 7% in today’s early morning trade after the Union Cabinet approved the amendment in the Foreign Direct Investment (FDI) policy on the space sector on Wednesday. This was done to attract overseas players and private companies into the space segment.

The decision was taken at the Cabinet meeting chaired by Prime Minister Narendra Modi.

As per a press release by the government, the satellites sub-sector has now been divided into three different activities “with defined limits for foreign investment in each such sector.”

“Under the amended FDI policy, 100% FDI is allowed in the space sector. The liberalised entry routes under the amended policy are aimed at attracting potential investors to invest in Indian companies in space,” the government said in its press release.

As per the existing FDI policy, FDI is permitted in the establishment and operation of satellites through the government approval route only. “In line with the vision and strategy under the Indian Space Policy 2023, the Union Cabinet has eased the FDI policy on the space sector by prescribing liberalised FDI thresholds for various sub-sectors and activities,” the press release said.

The amended policy introduces specific entry routes for various sectors:
Firstly, for activities like Satellites manufacturing and operation, satellite data products, ground segmentation, and user segment, up to 74% FDI is permissible under the automatic route. However, any investment beyond 74% in these activities necessitates government approval.

Secondly, the automatic route allows up to 49% FDI for launch vehicles and associated systems or subsystems, as well as for the creation of spaceports for launching and receiving spacecraft. Investments exceeding 49% in these sectors require government approval.

Lastly, for the manufacturing of components and systems/sub-systems for satellites, ground segments, and user segments, the automatic route permits up to 100% FDI, allowing full foreign ownership without needing government approval.>

The government said the proposed reforms seek to liberalise the FDI policy provisions in the space sector by prescribing a liberalised entry route and providing clarity for FDI in satellites, launch vehicles, and associated systems or subsystems, the creation of spaceports for launching and receiving spacecraft; and the manufacturing of space-related components and systems.

Following this development, MTAR Technologies saw a 7.19% surge in today’s intraday trade. Similarly, stocks of Apollo Micro Systems, Walchandnagar Industries, Paras Defence and Space Technologies, Data Patterns (India), Bharat Electronics, Centum Electronics, and Zen Technologies are currently trading with gains ranging from 1% to 4%.

These stocks have been consistently rising following the successful Chandrayaan-3 Moon landing, largely due to their connection to the mission. Additionally, the government’s commitment to allocate more funds to the space industry, increased launch services, and growth in the satellite internet market have also supported the sector. LiveMint