Foreign Direct Investment

Foreign Direct investment
Supplementing Indian Capital
www.femaindia.in
Primary Market
Secondary Market
Foreign Investments in India
www.femaindia.in
Foreign Investments in India

Foreign Investments
Repatriation Basis
Non Repatriation Basis
Foreign Direct Investments
Foreign Portfolio Investments
Foreign Venture Capital Investments
Other Investments
NRIs, PIO
Automatic Route
Govt Route
FIIs
NRI,PIO ,QFIs
SEBI regd. FVCIs
FIIs
NRIs,PIO,Q FIs
PROI
VCF, IVCUs
www.femaindia.in
What is FDI
FDI
Means investment by Non-resident Entity/Person resident outside India in the capital of an Indian Company under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000.
Consolidated FDI Policy

Issued by Department of Industrial Policy and Promotion(DIPP), Ministry of Commerce and Industry annually along with Press Notes/Press releases, rules and Regulations, A.P. Dir. (series) Circulars determine the modalities of Foreign Direct Investment in India
www.femaindia.in
Eligibility for FDI in India

A non-resident entity or PROI
Qualified Foreign Investors
NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan
SEBI registered Foreign Venture Capital Investor
Erstwhile Overseas Commercial Bodies
SEBI registered Foreign Institutional Investor

www.femaindia.in

It covers all persons resident outside India. Citizen of or an entity incorporated in Bangladesh can invest only under the Government route. *A citizen of or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space and atomic energy. *Amended by Press Note No.3 (2012 Series) on August 1, 2012 issued by DIPP
Non Resident Entity
NRIs or Citizens of Nepal and Bhutan
Invest in the capital of Indian companies on repatriation basis, subject to the condition that the amount of consideration for such investment shall be paid only by way of inward remittance in free foreign exchange through normal banking channels.
www.femaindia.in

Derecognized as class of investors in India w.e.f. September 16, 2003. Can make fresh investments under FDI Policy as incorporated non-resident entities, with the prior approval of GOI, if investment is through Government route; and with prior approval of RBI, if investment is through Automatic route. For those incorporated outside India and are not under the adverse notice of RBI
Foreign Institutional Investors(FII)
FII means an entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the SEBI (FII) Regulations 1995) SEBI registered FII can invest directly in Indian company under FDI Policy Can also invest though a registered broker on recognized Exchange under
www.femaindia.in

SEBI registered FVCIs are also allowed to invest under the FDI Scheme, as non-resident entities subject to FDI Policy and FEMA regulations in SEBI registered IVCU SEBI registered IVCF Other companies as per FDI policy
Foreign Venture Capital Fund
Qualified Foreign Investors
QFIs can invest through SEBI registered DP(for listed companies), equity shares of other Indian companies which are offered to public in India Individual & aggregate investment limit is 5% and 10% respectively of the paid up capital of an Indian company.
www.femaindia.in
Entities Into Which FDI Can Be Made
Indian Company
Partnership Firm/ Proprietorsh ip Concern
Venture Capital Funds
Trusts
LLPs
www.femaindia.in
Indian Company
Indian Company
Can issue capital against FDI, i.e. Equity shares, Fully and mandatorily convertible preference shares, Fully and mandatorily convertible Debentures, ADRs/GDRS
www.femaindia.in
Partnership Firm/ Proprietary Concern

Non Repatriation
NRI or PIO resident outside India can invest
Repatriation
NRIs/PIO only with prior approval of RBI
Investment by Inward remittance or out of NRE/FCNR/NRO account
Note: 1) An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or print media. 2) Other than NRI/PIO can invest with prior approval of RBI
www.femaindia.in
Venture Capital Fund

FVCIs are allowed to invest in Indian Venture Capital Undertakings (IVCUs) /Venture Capital Funds (VCFs) /other companies.
A person resident outside India can invest in Domestic VCF set up as a trust, subject to approval of the FIPB.
A person resident outside India can invest in a domestic VCF is set-up as an incorporated company under the Companies Act, 1956 under the automatic route.
www.femaindia.in
Trusts and Limited Liability Partnerships
Trusts
Limited Liability Partnerships
FDI in Trusts other than VCF is not permitted
FDI is permitted, subject to certain conditions
www.femaindia.in
Entry routes for FDI in India
Approval Route
Automatic Route
Foreign investor or the Indian company should obtain prior approval of Foreign Investment Promotion Board (FIPB)
Foreign investor or the Indian company doesn't require any approval from RBI or GOI
www.femaindia.in
Types of Instruments
Equity Shares
Fully & Compulsorily convertible preference Shares
Fully & Compulsorily convertible debentures
ADRs/GDRs/ FCCBs
www.femaindia.in
Pricing Guidelines
Fresh Issue of shares
Listed Companies- SEBI guidelines Unlisted Companies- Not less than fair value determined by SEBI registered Merchant Banker or a Chartered Accountant as per DFCF
Preferential Allotment
Issue Price shall not be less that the price as applicable to transfer of shares from resident to non-resident
www.femaindia.in
Pricing Guidelines
Right Shares
Company listed on recognised stock exchange - At a price as determined by the company For others- At a price which is not less than the price at which the offer on right basis is made to the resident shareholders
Acquisition/ transfer of existing shares (private arrangement)
Companies listed on recognized stock exchangenegotiated price for shares, which shall not be less than the price at which the preferential allotment of shares can be made under the SEBI guidelines, as applicable. Price per share arrived at certified by a SEBI registered Merchant Banker or a Chartered Accountant. Companies not listed on recognized stock exchangenegotiated price for shares, which shall not be less than the fair value to be determined by a SEBI registered Merchant Banker or a Chartered Accountant as per DFCF
www.femaindia.in
Total Foreign Investment in Indian Company
Direct Foreign Investment by non resident entity into Indian company
Indirect Foreign Investment by Resident Indian entity, having Foreign Investment
Total Foreign Investment in Indian Company
www.femaindia.in
Direct Foreign Investment in Indian Company for further Investment

Direct Foreign Investment in Indian Company for further Investment
Investing Company
Operating cum Investing Company
Non Operating Company
Approval of FIPB for formation of investing company with FDI
Sectoral Caps and Pricing Guidelines etc. to be complied with, as per FDI Policy
Approval of FIPB is required
www.femaindia.in
Calculation of Direct and Indirect Foreign Investment
Direct Foreign Investment
All investment directly by a non-resident entity into the Indian company.
www.femaindia.in
Calculation of Direct and Indirect Foreign Investment

Indirect foreign Investment
Investment by Indian companies owned and controlled by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens- This would not be considered for calculation of the indirect foreign investment.
Cases where condition (a) above is not satisfied or if the Indian investing company is owned or controlled by non resident entities- the entire investment would be considered as indirect foreign investment.
Exception: 100% owned subsidiaries of operating-cum-investing/investing companies, will be limited to the foreign investment in the operating-cuminvesting/ investing company
Note: A company is considered as Controlled by resident Indian citizens if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company A company is considered as 'Owned by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and / or Indian companies, which are ultimately owned and controlled by resident Indian citizens
www.femaindia.in
Down Stream Investment

Invests 49% in Y Ltd
Foreign Company Y Ltd, Indian Company
Less than 50% Investment in X Ltd
X Ltd, Indian Company
Total Indirect Foreign Investment is NIL
www.femaindia.in

More than 50% Investment in X Ltd
Total Indirect Foreign Investment is 15%
www.femaindia.in

More than 50% Investment in X Ltd
www.femaindia.in

Foreign Company
Y Ltd, Wholly Owned Subsidiary of X Ltd
75% Investment in X Ltd
www.femaindia.in
Modes of Investment under FDI

Modes of Investment
Issue of fresh shares
Transfer of existing shares by Person resident in or outside India
Issue of Rights / Bonus shares
Conversion of ECB / Lumpsum Fee / Royalty / Import of capital goods by SEZs into Equity/ Import payables / Pre incorporation expenses
Acquisition of shares under Scheme of Merger / Amalgamation
www.femaindia.in
Issue of Fresh Shares & Swap
Issue of Fresh Shares
Indian company may issue fresh shares /convertible debentures under FDI Scheme to PROI (who is eligible for investment in India) subject to compliance with FDI policy and FEMA Regulations
Issue of shares to a non-resident against shares swap
Issue can be done in lieu for the consideration which has to be paid for shares acquired in the overseas company, with prior approval of FIPB and in compliance of pricing guidelines
www.femaindia.in
Issue of Rights / Bonus shares

An Indian company may issue Rights / Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap, reporting requirements, etc.
Issue of Right /Bonus shares to Erstwhile OCBs
Right Shares- Specific prior permission from RBI. Bonus shares- Without prior approval of RBI. Should not be in the adverse list of RBI.
Additional allocation of rights share by residents to non-residents
Investee company can allot the additional rights shares out of unsubscribed portion, subject to the condition that the overall issue of shares to non-residents in the total paid-up capital of the company does not exceed the sectoral cap.
www.femaindia.in
Conversion of ECB / Lumpsum Fee / Royalty / Import of capital goods by SEZs into Equity/ Import payables / Pre incorporation expenses
Conversion of ECB into shares / convertible debentures
Lump-sum technical know-how fee/royalty
Import of capital goods by units in SEZs
Import of capital goods / machinery / equipment
Pre-operative / pre incorporation expenses
General Permission
General permission under automatic route or SIA / FIPB route
Can issue equity shares to non residents, subject to valuation
Allowed under Government route
Allowed under Government route
www.femaindia.in
Acquisition of shares under Scheme of Merger / Amalgamation

Mergers & Amalgamations of companies in India are usually governed by an order issued by a competent Court. The transferee company or new company is allowed to issue shares to the shareholders of the transferor company resident outside India, subject to following conditions
Percentage of shareholding of persons resident outside India in the transferee or new company does not exceed the sectoral cap, and
Transferor company or the transferee or the new company is not engaged in activities which are prohibited under the FDI policy
www.femaindia.in
Transfer of Shares
Transfers of existing shares by PRI to PROI or vice versa
Transfer where FIPB Approval required
Transfers where RBI Approval is required
By Gift
By Sale
www.femaindia.in
Transfers of existing shares by PRI to PROI or vice versa by way of Gift
By Gift
Non Resident to Non Resident
Non Resident to Resident
Resident to Non resident
General Permission
Comply with Sectoral Caps/Pricing Guidelines/ Reporting formalities
General Permission is granted
Approval of RBI with specific conditions
www.femaindia.in
Transfers of existing shares by way of Sale
Non Resident to Non Resident
Non Resident to Resident
General Permission granted
General Permission, if sale through recognised Stock Exchange
Where transfer is under SEBI guidelines and pricing guidelines are not met, provided following conditions are met
Comply with FDI policy and FEMA regulations www.femaindia.in
Pricing complies with relevant SEBI regulations
CA certificate is obtained
Compliance with reporting and other guidelines
Transfers of existing shares by way of Sale

Resident to Non Resident
General Permission granted, if sale through Stock Exchange
FIPB approval where required
Adhere to SEBI(SAST) Regulations
Certain conditions to be fulfilled if pricing guidelines are not met
NOC from regulators
Comply with FDI Policy and FEMA regulations www.femaindia.in
Pricing is compliant with specific regulations
CA Certificate of compliance of SEBI regulations
Transfer of Shares by Resident to Non Resident requiring FIPB approval
Transfer of shares from residents to non-residents by way of sale or otherwise
Transfer of shares of companies engaged in sector falling under the Government Route.
Transfer of shares resulting in foreign investments in the Indian company, breaching the sectoral cap applicable.
www.femaindia.in
Prior permission of the Reserve Bank in certain cases for acquisition / transfer of security
Deferment of payment of the amount of consideration
PRI who intends to transfer any security, by way of gift to PROI
Transfer of shares from NRI to NR
www.femaindia.in
Investments other than FDI
Investments other than FDI
Foreign Portfolio Investments
Foreign Venture Capital Investments
Other investments (GSec, NCDs, etc)
Investments on non-repatriable basis
www.femaindia.in
Foreign investments under Portfolio Investment Scheme (PIS)
Entities
Investment in listed Indian companies
Transfer of shares acquired under PIS under private arrangement
Prior intimation to Reserve Bank of India
www.femaindia.in
Entities
FIIs registered with SEBI
Eligible to purchase shares and convertible debentures issued by Indian companies.
NRIs
Eligible to purchase shares and convertible debentures , if permitted by designated branch of any AD Category - I bank (which has been authorized by RBI to administer the PIS)
SEBI approved sub accounts of FIIs (sub accounts)
General permission granted

www.femaindia.in
Not permitted to invest. OCBs which have already made investments under the PIS are allowed to continue holding such shares / convertible debentures till such time these are sold on stock exchange
Investment in Listed Companies

FIIs
An Individual FII/ SEBI approved sub accounts
Total holdings of all FIIs / SEBI approved sub accounts of FIIs
Maximum 10% investment of paidup capital or paid-up value of each series of convertible debentures
The limit would include shares held by SEBI registered FII/ sub accounts of FII under PIS as well as shares acquired by SEBI registered FII
Shall not exceed 24 % of paid-up capital or paid-up value of each series of convertible debentures.
Limit of 24% can be increased to the sectoral cap / statutory limit, by passing a Board resolution followed by a special resolution and subject to prior approval from RBI.
www.femaindia.in
Reporting of FDI By Company
Fresh issue of Shares
Transfer of Shares
Conversion of Equity into equity
ESOPs for allotment of equity shares
ADRs/GDRs
www.femaindia.in
Fresh Issue of Shares
Reporting of Inflow
Details of amount of consideration within 30 days from the date of receipt in Advance Reporting Form. Equity instruments shall be issued within 180 days, and have to file Form FC-GPR within 30 days from the date of issue FC-GPR for Issue of bonus/rights shares or shares on conversion of stock options issued under ESOP to persons resident outside India directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs
www.femaindia.in
Transfer of shares
Reporting of FDI for Transfer of shares route

Reporting of transfer of shares between residents and non-residents and vice- versa is to be made in Form FC-TRS It should be submitted to the AD Category I bank, within 60 days from the date of receipt of the amount of consideration. Onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India. The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a KYC check by the remittance receiving AD Category I bank at the time of receipt of funds.
www.femaindia.in
Conversion of ECB into equity
Reporting of conversion of ECB into equity

Details of issue of shares against conversion of ECB has to be reported to concerned Regional Office of RBI In case of full conversion of ECB into equity, the company shall report the conversion in Form FC-GPR as well as in Form ECB-2. In case of partial conversion of ECB, converted portion in Form FC-GPR well as in Form ECB-2 clearly differentiating the converted portion from the non-converted portion.
www.femaindia.in
ESOPs
Reporting of ESOPs for allotment of equity shares

The issuing company is required to report the details of issuance of ESOPs to its employees within 30 days from the date of issue of ESOPs. At the time of conversion of options into shares in FC-GPR, within 30 days of allotment of such shares.
www.femaindia.in
ADRs/GDRs
Reporting of ADR/GDR Issues

Indian company issuing ADRs / GDRs has to furnish full details of such issue in the Form DR, within 30 days from the date of closing of the issue. Company should also furnish a quarterly return in the Form-DR Quarterly, within 15 days of the close of the calendar quarter.
www.femaindia.in
Prohibited Sectors
Lottery Business including Government /private lottery, online lotteries, etc.
Retail Trading (except single brand product retailing)
Real Estate Business or Construction of Farm Houses
Trading in Transferable Development Rights (TDRs)
Nidhi company www.femaindia.in
Prohibited Sectors
Chit funds
Gambling and Betting including casinos etc.
Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).
www.femaindia.in
Foreign Investment Promotion Board
FIPB
Secretaries to Government
ChairpersonDepartment of Economic Affairs, Ministry of Finance
Department of Industrial Policy & Promotion, Ministry of Commerce & Industry
Department of Commerce, Ministry of Commerce & Industry
Economic Relations, Ministry of External Affairs
Ministry of Overseas Indian Affairs
www.femaindia.in
Levels of Approvals for cases under Government Route
Minister of Finance
Cabinet Committee on Economic Affairs (CCEA)
In-charge of FIPB
Would consider recommendations of FIPB on proposals with total foreign equity inflow of more than Rs. 1200 crore
Would consider the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs.1200 crore.
It would also consider proposals which may be referred to it by the FIPB/ the Minister of Finance
www.femaindia.in
Cases which do not require Fresh Approval

(For bringing in additional foreign investment into the same entity)
Required FIPB/CCFI/CCEA approval was obtained at the time of initial foreign investment, and the activity was subsequently came under automatic route
Prior approval of FIPB/CCFI/CCEA was obtained for activities with sectoral caps at the time of initial foreign investment, and the caps were removed/increased and the activities placed under the automatic route. Additional investment alongwith the initial/original investment shall not exceed the sectoral caps
Prior approval of FIPB/CCFI/CCEA had been obtained at the time of original foreign investment due to requirements of Press Note 18/1998 or Press Note 1 of 2005 and prior approval of the Government under the FDI policy is not required for any other reason/purpose
www.femaindia.in
Compounding of Offences under FEMA
Compounding under FEMA
Under Section 13(1) of the FEMA, 1999, an applicant can seek compounding voluntarily
What can be compounded
Contravention of any provision of FEMA, 1999,or any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by RBI
Powers of Compounding
RBI empowered to compound contraventions of all sections of FEMA, 1999, except Section 3(a) of the Act Directorate of Enforcement empowered to compound contraventions under Section 3(a) of FEMA, 1999 (dealing essentially with Hawala transactions).
www.femaindia.in
Type of Contravention
Technical and/or minor
Material
Serious/ Sensitive
Needs only an administrative cautionary advice
Compounding of the contravention
Money Laundering, National and Security concerns involving serious infringement of regulatory framework
Note: Master Circular dated July 2, 2012 issued by RBI reserves the right to classify the contraventions as stated above and neither the contravener nor others have any right to classify any contravention as technical suo- moto.
www.femaindia.in
Process of Compounding
To be submitted with Compounding Authority on being advised of a contravention under FEMA, 1999, either through a memorandum or suo moto on being made or on becoming aware of the contravention
Application
After completion of proceedings, order to be issued by the authority within 180 days from the date of the receipt of application
Order
Additional Information
Authority may call for any additional information, to be submitted within specified period
www.femaindia.in
Process of Compounding
Application will be examined to assess whether the contravention is compoundable and the amount of contravention is quantified.
Examination & Assessment
Penalty
Penalty up to thrice the sum involved in such contravention where the amount is quantifiable or up to Rupees Two lakh, where the amount is not quantifiable If contravention is a continuing one, further penalty which may extend to Rs. 5000/-for every day after the first day during which the contravention continues. FE (Compounding Proceedings) Rules, 2000, prescribes the power to compound the contravention with regard to the sum involved in such contravention. No contravention shall be compounded unless the amount involved in the contravention is quantifiable
www.femaindia.in
Thank You!
Arun Gupta Corporate Professionals, D-28, South Ex-Part-1, New Delhi - 110 049, India, (B): 09810275571, +91 11 40622214
Our Gamut of Services Investment Banking | Corporate Restructuring | Stock Exchange Services | Securities Laws & Capital Market Advisory | Corporate Compliances & Due Diligence | Global Business Setup | Corporate Taxation | Forex & Overseas Transactions | Corporate Finance |
www.CorporateProfessionals.com
www.femaindia.in

Foreign Direct Investment

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Foreign Direct Investment

Hochgeladen von

Copyright:

Verfügbare Formate

Foreign Direct investment

Supplementing Indian Capital

Foreign Investments in India

Foreign Investments in India

Non Repatriation Basis

Foreign Direct Investments

Foreign Portfolio Investments

Foreign Venture Capital Investments

SEBI regd. FVCIs

Consolidated FDI Policy

Eligibility for FDI in India

Qualified Foreign Investors

SEBI registered Foreign Venture Capital Investor

Erstwhile Overseas Commercial Bodies

SEBI registered Foreign Institutional Investor

Eligibility for FDI in India

Non Resident Entity

NRIs or Citizens of Nepal and Bhutan

Eligibility for FDI in India

Erstwhile Overseas Commercial Bodies

Foreign Institutional Investors(FII)

Eligibility for FDI in India

Foreign Venture Capital Fund

Qualified Foreign Investors

Entities Into Which FDI Can Be Made

Partnership Firm/ Proprietorsh ip Concern

Venture Capital Funds

Partnership Firm/ Proprietary Concern

Investment by Inward remittance or out of NRE/FCNR/NRO account

Venture Capital Fund

Trusts and Limited Liability Partnerships

Limited Liability Partnerships

FDI in Trusts other than VCF is not permitted

FDI is permitted, subject to certain conditions

Entry routes for FDI in India

Fully & Compulsorily convertible preference Shares

Fully & Compulsorily convertible debentures

Fresh Issue of shares

Acquisition/ transfer of existing shares (private arrangement)

Total Foreign Investment in Indian Company

Direct Foreign Investment by non resident entity into Indian company

Indirect Foreign Investment by Resident Indian entity, having Foreign Investment

Total Foreign Investment in Indian Company

Direct Foreign Investment in Indian Company for further Investment

Operating cum Investing Company

Non Operating Company

Approval of FIPB for formation of investing company with FDI

Approval of FIPB is required

Calculation of Direct and Indirect Foreign Investment

Direct Foreign Investment

All investment directly by a non-resident entity into the Indian company.

Calculation of Direct and Indirect Foreign Investment

Down Stream Investment

Less than 50% Investment in X Ltd

X Ltd, Indian Company

Total Indirect Foreign Investment is NIL

Down Stream Investment

Invests 15% in Y Ltd

More than 50% Investment in X Ltd

X Ltd, Indian Company

Total Indirect Foreign Investment is 15%

Down Stream Investment

Invests 90% in Y Ltd