Foreign investors have two main options for investing in India: directly setting up operations through a branch, liaison, or project office, or establishing an Indian subsidiary. Setting up a subsidiary is generally advisable for larger investments. Liaison offices are limited as they cannot earn income, while project offices can only operate for the duration of a specific project. Branch offices allow for more business activities and profit repatriation but cannot do manufacturing. Establishing a wholly-owned subsidiary provides benefits like full foreign ownership and incorporation under Indian law. Joint ventures are also popular and allow sharing of markets, intellectual property, and risks.

1. Foreign Direct Investment
By
Swapnil Mali - 11037

2. Strategies for foreign investors
to invest in India
• Two major types
A foreign investor may directly set up its operations in India
through a branch office, a representative office, a liaison
office or a project office to carry out business.
It may do so through an Indian arm i.e. through a subsidiary
company set up in India under Indian laws.
• Second option is advisable, especially when investment is
large.

3. Strategies for foreign investors
to invest in India
• A foreign company is one which has been incorporated
outside India and conducts business in India. These companies
are required to comply with the provisions of Indian
Companies Act, 1956
• Liaison offices, project offices, branch offices have to register
themselves with the Registrar of Companies in New Delhi,
within 30 days of setting up business in India

4. Liaison Offices
• This option is limited as company not allowed to undertake
any business hence cannot earn income.
• Have to make an application in form FNC-1 to the Reserve
Bank of India, along with the following documents:
 English version of the certificate of incorporation / Registration or
Memorandum & Articles of Association attested by Indian
Embassy/ Notary Public in the country of Registration.
 Latest Audited Balance Sheet of the applicant entity.
• Permission to set up such offices is initially granted for a
period of 3 years and this may be extended from time to time
by the Regional Office of RBI under whose jurisdiction the
office is set up

5. Project Office
• A foreign company, which has secured a contract to execute a
project in India is allowed to set up Project Office in India.
• Project office approvals are granted only for the specific
project being executed in India and must close after the
project is completed.
• Required to register itself with the Registrar of Companies
(ROC) and to comply with certain procedural formalities, as
prescribed under the Companies Act, 1956.

6. Branch Office
• Approval from the RBI must be compulsorily registered under the
(Indian) Companies Act, 1956.
• A branch office so approved and registered can carry on the
following activities:
 Export / Import of goods
 Rendering professional or consultancy services
 Carrying out research work, in which the parent company is
engaged
 Promoting technical or financial collaborations between Indian
companies and parent or overseas group company
 Representing the parent company in India and acting as buying /
selling agents in India
 Rendering services in Information Technology and development of
software in India

7. • Unlike a liaison office, branch offices can generate revenue
from the sales in the local market and repatriate the profits to
the foreign parent company.
• Funding is possible through the receipts from the parent
company and from business operations in India.
• A branch office cannot carry on any manufacturing activities.
Manufacturing activities can be carried on only through the
means of a company incorporated in India.
• A branch office of a foreign company in India is taxed at higher
rates of corporate income tax than a domestic company.

8. Through Indian arm
• As an Indian company
 A foreign company can commence operations in India through
incorporation of a company under the provisions of the Indian
Companies Act, 1956
 Foreign equity in such companies can be up to 100% depending
on the business plan of the foreign investor
 For registration as an Indian company and its incorporation, an
application has to be filed with the Registrar of the Companies

9. • Joint Venture
 A Joint Venture is a strategic alliance where two or more parties
form a partnership to share markets / intellectual property and
its knowledge and of course profits.
 Availability of human resources in marketing / R&D/ Production
and Operations.
 Availability of legal resources with the local partner to structure
the joint venture and ensure all compliances.
 Accessibility of distribution channel. Reduction in over all costs/
economies of scale.
 Spreading of risks mainly on large scale investments.

10. • Wholly owned subsidiary company
 Instead of having a joint venture company, a foreign company
may incorporate its wholly owned subsidiary in India, where 100
per cent FDI is permitted.
 All such cases are subject to prior approval from the Foreign
Investment Promotion Board (FIPB).
 At least 50 % of the production is to be exported.

11. • GDR –
• A global depository receipt (GDR) is a certificate issued by a
depository bank, which purchases shares of foreign companies
and deposits it on the account. GDRs represent ownership of an
underlying number of shares.
• If the Indian Company which has issued GDRs in the American
market wishes to further extend it to other developed and
advanced countries such as Europe, then they can sell these ADRs
to the public of Europe and the same would be named as GDR.
• ADR –
• An American depositary receipt (ADR) is a negotiable security
that represents securities of a non-US company that trade in the
US financial markets.
• The first ADR was introduced by J.P. Morgan in 1927 for the
British retailer Selfridges.

12. • FCCB – foreign currency convertible bonds
 FCCB's are issued in currencies different from the issuing
company's domestic currency. Corporates issue FCCB's to raise
money in foreign currencies. These bonds retain all features of a
convertible bond making them very attractive to both the
investors and the issuers.
 FCCB's appear on the liabilities side of the issuing company's
balance-sheet

13. Thank You !