Foreign Investement Into India


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Introduction to laws relating to foreign investment in India

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Foreign Investement Into India

  1. 1. Presented by Neha Singhi Plot D2/1, Block EP, Sector V, Salt Lake City, Kolkata- 700 091 Tel: 9133 4008 3385 Email: [email_address]
  2. 2. <ul><li>Foreign Investments in India </li></ul><ul><li>Trend of Foreign Investment </li></ul><ul><li>Factors attracting Foreign Investment </li></ul><ul><li>Structure of Foreign Investment </li></ul><ul><li>Foreign Direct Investment </li></ul><ul><ul><li>FDI in India </li></ul></ul><ul><ul><li>No Entry </li></ul></ul><ul><ul><li>Mode of FDI </li></ul></ul><ul><ul><li>Foreign Investment Inflows </li></ul></ul><ul><ul><li>Investment by NRI </li></ul></ul><ul><li>External Commercial Borrowings </li></ul><ul><ul><li>Know ECB better </li></ul></ul><ul><ul><li>Amount and Maturity </li></ul></ul><ul><ul><li>Benefits </li></ul></ul><ul><li>Conclusion </li></ul><ul><li>X </li></ul><ul><li>X </li></ul>
  3. 5. <ul><li>India has always stood the test of times, and inspite of the low market sentiments world-over in 2008, Indian economy has managed to pull through the crisis. </li></ul><ul><li>India has dynamic and highly competitive private sector which has long been the backbone of its economic activity and offers considerable scope for foreign investment, joint ventures and collaborations </li></ul><ul><li>The liberalised economy has also paved way for portfolio investment , ECB/FCCB borrowings providing funding avenues to various companies. </li></ul><ul><li>X </li></ul><ul><li>X </li></ul>
  4. 7. <ul><li>Liberalisation of economy </li></ul><ul><li>Huge consumer base </li></ul><ul><li>Drive for Fast Growth </li></ul><ul><li>Technological and Innovation </li></ul><ul><li>Expansion in Market Share </li></ul><ul><li>Incentive by Government </li></ul><ul><li>Overcome Competition </li></ul><ul><li>Domestic Demand Constraints </li></ul><ul><li>Means of Communication </li></ul><ul><li>X </li></ul><ul><li>X </li></ul>
  5. 10. <ul><li>FDI may come in India through Automatic or Approval route. </li></ul><ul><li>Foreign Institutional Investors registered with SEBI and NRIs are eligible to purchase shares and convertible debentures issued by Indian companies under the Portfolio Investment Scheme. </li></ul><ul><li>Eligibility for Investment: </li></ul><ul><ul><li>Any person or entity incorporated outside India can invest in India subject to the FDI policy and required approvals </li></ul></ul><ul><ul><li>No citizen of Pakistan or entity of Pakistan can invest in India </li></ul></ul><ul><ul><li>Bangladeshi can invest after prior approval from FIPB </li></ul></ul><ul><ul><li>X </li></ul></ul><ul><ul><li>X </li></ul></ul>
  6. 11. <ul><li>No entry for foreign investment in any form in an organisation engaged in any of the following activities: </li></ul><ul><ul><li>Business of chit fund, or </li></ul></ul><ul><ul><li>Nidhi Company, or </li></ul></ul><ul><ul><li>Agricultural* or plantation activities, or </li></ul></ul><ul><ul><li>Real estate business, or construction of farm houses* </li></ul></ul><ul><ul><li>Trading in Transferable Development Rights (TDRs). </li></ul></ul><ul><ul><li>Retail Trading (except single brand product retailing) </li></ul></ul><ul><ul><li>Atomic Energy </li></ul></ul><ul><ul><li>Lottery Business </li></ul></ul><ul><ul><li>Gambling and Betting </li></ul></ul><ul><li>Exceptions </li></ul>
  7. 14. <ul><li>Shares or debentures of existing Indian companies directly on non-repatriation basis </li></ul><ul><li>Under the Portfolio Investment Scheme of NSE/BSE listed Indian companies on repatriation and non-repatriation basis </li></ul><ul><ul><li>Maximum of 5% of the paid-up share capital by NRI </li></ul></ul><ul><ul><li>Aggregate investment by all NRIs cannot exceed 10%, or 24% if a special resolution is passed </li></ul></ul><ul><li>NRIs can also obtain loans abroad against a collateral of shares or debentures of Indian companies </li></ul><ul><li>NRI or PIO can open a demat account with any depository participant (DP). No permission is required from the RBI to open a demat account </li></ul><ul><li>NRIs can invest in exchange-traded derivative contracts out of funds held in India only on a non-repatriation basis </li></ul><ul><li>NRIs are not permitted to make investments in Small Savings Schemes including PPF. </li></ul><ul><li>X </li></ul><ul><li>X </li></ul>
  8. 16. <ul><li>Basically commercial loans availed from non-resident lenders with minimum average maturity of 3 years. </li></ul><ul><li>FCCBs are bond type structure where the interest and principal is paid in foreign currency </li></ul><ul><li>ECB may be through Automatic route, requiring no approval OR through approval of RBI. </li></ul><ul><li>There is criteria of eligible buyers and recognised lenders for ECB </li></ul><ul><li>There are end-use restrictions in ECB </li></ul><ul><li>X </li></ul><ul><li>X </li></ul>
  9. 17. <ul><li>Automatic Route: </li></ul><ul><ul><li>The maximum amount of ECB which can be raised by a corporate is USD 500 million or equivalent during a financial year. </li></ul></ul><ul><ul><li>ECB up to USD 20 million or equivalent in a financial year with minimum average maturity of three years . </li></ul></ul><ul><ul><li>ECB above USD 20 million and up to USD 500 million or equivalent with a minimum average maturity of five years. </li></ul></ul><ul><ul><li>ECB up to USD 20 million can have call/put option provided the minimum average maturity of three years is complied with before exercising call/put option. </li></ul></ul><ul><ul><li>Approval Route </li></ul></ul><ul><ul><li>Additional USD 250 million with average maturity of more than 10 years </li></ul></ul><ul><ul><li>X </li></ul></ul><ul><ul><li>X </li></ul></ul>
  10. 18. <ul><li>Investor </li></ul><ul><ul><li>ECB is for specific period, which can be as short as three years </li></ul></ul><ul><ul><li>Fixed Return, usually the rates of interest are fixed </li></ul></ul><ul><ul><li>The interest and the borrowed amount are repatriable </li></ul></ul><ul><ul><li>No owners risk as in case of Equity Investment </li></ul></ul><ul><li>Borrower </li></ul><ul><ul><li>No dilution in ownership </li></ul></ul><ul><ul><li>Considerably large funds can be raised as per requirements of borrower </li></ul></ul><ul><ul><li>Usually only a fixed rate of interest is to be paid </li></ul></ul><ul><ul><li>Easy Availability of funds because ECB is more appealing to Investors </li></ul></ul><ul><ul><li>X </li></ul></ul><ul><ul><li>X </li></ul></ul>
  11. 19. <ul><li>Investors have posed faith in Indian economy, and surely the golden bird will continue to soar high! </li></ul><ul><li>** For any clarifications, please contact the author </li></ul>