FDI vs. FII vs. FPI - Chiranjiv Kumar http://chiranjivkumar.

com/fdi-vs-fii-vs-fpi/

POSTED BY: CHIRANJIV KUMAR / IN FINANCE / 1 COMMENT

For the sake of simplicity, home country is assumed to be India.

You are a businessman living in USA and you have idle funds which you want to invest then you have 3 ways to do it.

If you have large capital base then you can try opening a business by acquiring a business in India or setting up
a new unit. (FDI)
If you have normal capital base and you don’t have time to look a er the business but still want to have the
controlling interest in India then you can choose to acquire equity of company in India. Say 20-30%. (FPI)
If you already have a good portfolio but you want to diversify investments, you may consider investing in
securities like debentures, bonds, shares or real property etc. in India. (FII)

A Foreign direct investment (FDI) is a controlling ownership in a business enterprise in one country by an
entity based in another country.
Explanation – In simple words, it is the investment by a foreign company in India in controlling interest which
means setting up businesses and entering into joint venture, by mergers and acquisitions, building new
facilities, reinvesting profits earned from overseas operations and intra-company loans. The name also
suggests that this is direct investment which means an investment in primary market. The motive is to start
up a business in India.

A Foreign portfolio investment is an investment in equity  by one country in another country.

Explanation – Investment by a foreign country in India in equity. The motive is to ensure a controlling interest
in India without investing huge amount as in FDI. It also ensures flexibility in entry and exit.

Chiranjiv Kumar
Chartered Accountant | IIM Indore PGP 2017-19 |
CFA Level 3 Candidate A Foreign institutional investment (FII) is investment in securities, real property and other investment assets by one
country in another country.

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FDI vs. FII vs. FPI - Chiranjiv Kumar http://chiranjivkumar.com/fdi-vs-fii-vs-fpi/

Explanation – It is the investment by a foreign company in India in secondary market of India. Investors include
mutual fund companies, hedge fund companies etc. Motive is not to take controlling interest of the company but to
diversify portfolio ensuring hedging, high returns with quick entry and exit.

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Rajat Baliyan
nice job dude.this website is very attrective and soothing.well done
Like · Reply · 3y

Bhaskar Chakravorty
Thanks a lot. The best article on the net on basics of FDI VS FPI vs FII.
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Deepak Malik
Nice and straight explanation. Keep up the good work.
Like · Reply · 3y

Hoang Viet Vu
First sentence, host country is India, not Home country. Anyway, thank you for your explanation .
Like · Reply · 1 · 3y

Navneesh Kathania
thanks sir, simple define
Like · Reply · 3y

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Chiranjiv Kumar
Chartered Accountant | IIM Indore PGP 2017-19 |
CFA Level 3 Candidate
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Chiranjiv Kumar
Chartered Accountant | IIM Indore PGP 2017-19 |
CFA Level 3 Candidate

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