FOREIGN DIRECT INVESTMENT
A firm invests directly in foreign facility
Investment either by buying a company or
expanding operations of an existing business
A firm that engages in FDI becomes
multinational enterprise (MNE)
Multinational = “more than one country”
FOREIGN DIRECT INVESTMENT
– mergers and acquisitions
– building new facilities
– reinvesting profits earned from overseas operations
– Intra company loans
Involves ownership of entity abroad for
– R & D
– Access of raw materials and other resource
FOREIGN DIRECT INVESTMENT
The company has direct managerial control
– Depending on its extent of ownership and
– On other contractual terms of the FDI
No managerial involvement = portfolio investment
Most FDI flow has been to developed countries from
FDI increase to developing countries since ‘85
With a conducive regulatory environment and high volumes of content consumption,
India holds significant potential for foreign investments across all segments of the
The industry is projected to grow at a CAGR of 12% to reach US$11.4 billion by
The continued digitization of distribution infrastructure, the demand for regional
and niche content, and low TV penetration will drive growth in this segment.
Indian publishing industry is projected to grow at a CAGR of 11% to reach US$7.1
billion by 2014.
A low readership penetration of 30% compared with a literacy rate of 74%
underscores the potential for further growth for publishing in India.
The Indian fi lm industry is projected to grow from US$3.2 billion in 2010 to US$5
billion by 2014 at a CAGR of 14.1%.
Growth is expected to come from the expansion of multiplexes in smaller
cities, investments by foreign studios in domestic and regional productions, the
growing popularity of niche movies and the emergence of digital and ancillary
RADIO AND MUSIC INDUSTRY
• The radio and music industries contribute just 2.4% of the total Indian M&E
• They are projected to grow at a CAGR of 17.3% to reach US$844 million by 2014.
FDI IN PRINT MEDIA
FDI up to 100% is permitted in publishing/printing scientific
and technical magazines, periodicals and journals.
In the news and current affairs category, such as
newspapers,FDI has been allowed up to 26% subject to
certain conditions including:
– The largest shareholder must hold at least 51% equity·
– Three-fourths of directors and all executive and editorial staff
have to be resident Indians
Upto 74% publishing scientific/technical and specialty
FDI FOR RADIO
Total foreign investment including FDI by OCB/NRI/PIO
etc, is permitted to the extent of not more than 20% of
the paid up equity subject to the following conditions:
– One Indian individual or company owns more than 50% of
the paid-up equity excluding the equity held by banks and
other lending institutions
– The majority shareholder exercises management control
over the applicant company
– Has only resident Indians as directors on the board·
– All key executive officers of the applicant entity are
FDI IN BROADCASTING
74% FDI: Under the Broadcasting Carriage Service’s investment policy, 74 %
FDI is permissible for
– Direct – to – home (DTH),
– Cable Networks,
– Mobile TV & Head end-in-the Sky Broadcasting Services (HITS).
There is automatic route up to 49% investment and government route
beyond 49% and up to 74%.
49% FDI: Under the Broadcasting Carriage Service’s investment policy, 49%
FDI is permissible for Cable Networks under the Automatic route.
26% FDI: Under the Broadcasting Content Services’ investment policy, 26%
FDI is permissible for Terrestrial Broadcasting FM (FM Radio) and Up-linking
of News & Current Affairs’ TV Channels with the Government approval.
FDI IN FILMS
FDI in all film-related activities such as film financing,
production, distribution, exhibition, marketing etc. is
permitted up to 100% for all companies under the
FDI IN ADVERTISEMENTS
Government has permitted 100% foreign direct
investment (FDI) in the advertising sector through the
HOW TO ENTER INTO INDIAN MARKET
Foreign corporations are permitted to open liaison/representative
offices in India subject to approval by the Reserve Bank of India
Foreign corporations may open branch offices to conduct activities
permitted by the RBI after obtaining approval from the RBI.
Foreign corporations can set up subsidiary companies in India,
subject to FDI guidelines.
Limited liability partnership (LLP) Provides more flexibility in
operations compared with a subsidiary. Recently, FDI has been
permitted in LLPs subject to prescribed conditions.
FUNDING OF BUSINESS IN INDIA
Equity share capital is a conventional method of funding a local Indian
Foreign investments through convertible preference shares that are fully
and mandatorily convertible into equity shares are treated as FDI.
Like preference shares, the treatment of debentures as FDI or External
Commercial Borrowing (ECB) depends on their convertibility into equity
ECBs can be accessed under two routes: the automatic route (without RBI
approval) and the approval route (with RBI approval).
Other forms of funding include the issue of American Depository
Receipts, Global Depository Receipts, and Foreign Currency Convertible
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