Flows of capital from one nation to another in exchange for significant ownership stakes in domestic companies or other domestic assets. Typically, foreign investment denotes that foreigners take a somewhat active role in management as a part of their investment. Foreign investment typically works both ways, especially between countries of relatively equal economic stature.
There are various ways to invest in foreign business but there are three main options that many investors use. Consider the following.You can choose to invest in an equity acquisition. In this situation, you are buying shares of an existing company. You could also be purchasing shares in an enterprise just created.Another option is to make loans. You may be a parent company loaning funds to others.You may be a profit reinvestment option. In this situation, you invest in the further expansion of businesses.
Domestic capital is inadequate for purpose of economic growth.During the period in which the capital market is in the process of development, foreign capital is essential as a temporary measure.Foreign capital brings with it other scarce productive factors; technical know how, business experience and knowledge.
Foreign Direct Investments Loan investments Mutual funds
American co’s Exchange traded fundsGlobal real estate mutual funds (REITs)
Foreign Investment Promotion Board(FIPB) Expedite clearance process Periodically review implementation of cleared proposals Review general and sectoral policy guidelines Undertake investment promotion activitiesSecretariat for industrial assistance(SIA) Acts as gateway to industrial investment in india Assist entrepreneurs & investors in setting up projects Liaise with govt.bodies to seek necessary clearance.
Foreign Investment Implementation Authority(FIIA) Quick implementation of FDI approvals Resolution of operational difficulties faced by foreign investors Gather feedback from foreign investorsOther authorities involved: Investment comission Project approval board RBI
Foreign investment is allowed in all areas except following sectors where foreign investment is prohibited: Atomic energy Agriculture(except floriculture,horticulture,seed development etc.) Lottery business/gambling & betting Plantations(except tea plantations)
Different options for Indian Corporates Investment through GDRs & ADRs Mobilization of funds through preference shares Mobilization of fund through external commercial borrowings Foreign currency exchangeable bonds
FI Equity Inflow By Countries Maturities 3%3% 4% Others 4% Singapure 5% U.S.A 43%8% U.K Netherlands9% Cyprus Japan 21% Germany
Local market demand-86% Low cost operations-29% Ease of making FDI-29% Labour availability-29% Entry of other players-24% Political stability-24% Time zone advantage-14%
Play a complementary role in overall capital formation. Employment generation & productivity enhancement. Encourages the transfer of management skills, intellectual property,& technology. Improves Forex position of the country. Promotion of the competition within the local input market. Development of the human capital resources. Increase in exports. Increase tax revenues.
A co’s may lose out on its ownership to an overseas co’s. Govt.has less control over the functioning of the co’s that is functioning as the wholly owned subsidiary of an overseas co’s. FI enterning & taking the control of already established market, where local co’s are meeting the requirements of the market. Invest in machinery & intellectual property. Not in wages. Large giants can set up monopolies in highly profitable sector.
FII is eligible & get registered with SEBI. such as pension funds University Funds mutual funds Endowments investment Trusts Foundations Banks Broad based Funds Charitable Societies Re-insurance Companies Foreign Central Bank Foreign Government Agencies Charitable Trusts Insurance International or Multilateral Companies Organizations/Agency Sovereign Wealth funds
FII can be made in two capacities Behalf ofAn Its for on Sub- accounts.
SEBI grants registration to the FII and subaccountwhich is permanent unless suspended or cancelledby SEBI, subject to payment of fees and filinginformation every three years.The FIIs can also access FDI route for investments inan Indian company.