Beruflich Dokumente
Kultur Dokumente
Long-term investment by a foreign direct investor in a foreign economy A source of capital and investment involving foreign control of production A channel of technology transfer and industrial development It usually involves participation in management, joint-venture, transfer of
Types of FDI
Greenfield Investment Direct investment in new facilities or the expansion of existing facilities. Create new production capacity and jobs, transfer technology, etc. Profit flows out of the host nation Horizontal Foreign Direct Investment Investment in the same industry abroad as a firm operates in at home.
Types of FDI
Resource Seeking Investments which seek to acquire factors of production that are more efficient than those obtainable in the home economy of the firm. When resources may not be available in the home economy at all. Market Seeking Investments which aim at either penetrating new markets or maintaining existing ones. Large market to capture Global Presence
Expansion
Efficiency Seeking To increase their efficiency by exploiting the benefits of economies of scale and scope, etc For increasing the profitability of the firm. Mostly widely practiced between developed economies
Mode of Entry
Joint Venture Green Field Strategy Wholly owned subsidiary Project Office Mergers and Acquisitions
FDI Incentives
Low corporate tax and income tax rates Special Economic Zones SEZ EPZ - Export Processing Zones Investment financial subsidies Soft loan or loan guarantees
Foreign direct investment in August dipped by about 60 per cent to aprox. USD 34 billion, the lowest
in 2010 fiscal, industry department data released showed.
In the first two months of 2010-11 fiscal, FDI inflow into India was at an all-time high of $7.78 billion up 77% from $4.4 billion during the corresponding period in the previous year.
Major Investments
Companies
Wal mart,Marks Intel Corp. British & cairn Essar power Toyota Panasonic
Sector
Retail I.T Oil & Energy Power sector Automobile
Investment
US$ 10 Billion US$ 40 Billion US$ 2 Billion US$ 2 Billion US$ 10.51 Billion
7/3/2012
Source:
10
Forbidden Territories
Arms and ammunition
Atomic Energy
Railway Transport Coal and lignite Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc. Retail Trading (Recently Allowed 2011). Lottery Business Gambling and Betting
Insurance Sector
FDI up to 26% in the Insurance sector is allowed on the automatic route subject to obtaining licence from Insurance Regulatory & Development Authority (IRDA)
Financial Consultancy Stock Broking Asset Management Factoring Venture Capital Custodial Services
Housing Finance
Micro Credit
Telecommunication
FDI is limited to 49% subject to licensing and security requirements and adherence by the companies to the license conditions for foreign equity cap and lock- in period for transfer and addition of equity and other license provisions.
ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is permitted up to 74% with FDI,
beyond 49% requiring Government approval. FDI up to 100% is allowed for the following activities in the telecom sector : ISPs not providing gateways (both for satellite and submarine cables); Infrastructure Providers providing dark fiber (IP Category 1); Electronic Mail; and Voice Mail
Trading
Permitted up to 51% provided it is primarily export activities, and the undertaking is an export house/trading house/super trading house/star trading house. 100% FDI is permitted in case of trading companies for the following activities: exports bulk imports with ex-port/ex-bonded warehouse sales; cash and carry wholesale trading; other import of goods or services provided at least 75% is for procurement and sale of goods and services among the companies of the same group and not for third party use or onward transfer/distribution/sales. FDI up to 100% permitted for e-commerce activities subject to the condition that such companies would divest 26% of their equity in favour of the Indian public in five years.
FDI proposals for the manufacture of licensable drugs and pharmaceuticals and bulk drugs produced
by recombinant DNA technology, and specific cell / tissue targeted formulations will require prior Government approval.
Power
Up to 100% FDI allowed in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. There is no limit on the project cost and quantum of foreign direct investment.
Ranks
%age with total inflows 18.77 17.84 8.7 8.04 6.31 4.95 3.33 2.75 2.68 2.26
Services Sector 2. (financial & non-financial) Telecommunications 3. (radio paging, cellular mobile, basic telephone services)
4 Transportation Industry Fuels 5. (power + oil refinery) Chemicals 6. (other than fertilizers) Construction activities 7. (including roads & highways) 8. Drugs & Pharmaceuticals 9. Food Processing Industries 10. Cement and Gypsum Products TOTAL FDI INFLOWS
SECTOR
Automotive
USD (Mn)
518 1,375 1,133 896 1,484 1,327
SECTOR
Manufacturing Media Oil & Gas Pharma & biotech Telecom Others
USD (Mn)
933 630 384 2,520 2,198 4,006
Number of deals
Banking and Financial Chemicals and Plastics Electrical and Electronics Energy FMCG, Food and Beverages IT and ITES
USD Billion
15 10 5 0
2,903
Total
20,305
Trends: Ratio of the Size of acquisition to the size of acquirer has grown from 10 percent in 2004 to 25 percent in 2006. Cross-border deals are growing faster than domestic deals Private Equity (PE) houses have funded projects as well as made a few acquisitions in India
In 2006, there were a total of 480 M&A deals and 302 private equity deals Average deal size close to USD 36 million Contribution of private equity deals to total number of deals have increased from nearly 9 percent in 2004 to 28 percent in 2006
USD 6 billion
Plans to spend on its development operations in India over the next four years
Plans investment in private equity, real estate, and private wealth management
USD 1 billion
Aditya Birla Group increased its stake in Idea Cellular by acquiring 48.14-percent stake
Renault, Nissan and Mahindra & Mahindra has initiated a Greenfield automobile plant project in Chennai.
Background
Started September 14, 1992 with suitable restrictions Permitted to invest in all the securities traded on the primary and secondary markets Reputed foreign investors, such as Pension Funds etc., were allowed to invest in Indian capital market. Since 1995 the flow of FII is being increasing with new investors coming into the market.
Financial Institutional Investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets. They can also include operating companies which decide to invest their profits to some degree in these types of assets. Types of typical investors include banks, insurance companies, retirement or pension funds, hedge funds, investment advisors and mutual funds.
FII Route
As FII
Overseas pension funds, mutual funds, investment trust, asset management company,
nominee company, bank, institutional portfolio manager,etc
As Sub-accounts
The sub account is generally the underlying fund on whose behalf the FII invests. The
following entities are eligible to be registered as sub-accounts, viz. partnership firms, private company, public company, pension fund, investment trust, and individuals.
Forbidden Territories
Not allowed to invest in any company which is engaged or proposes to engage in the
following activities:
Business of chit fund Nidhi Company Agricultural or plantation activities Real estate business or construction of farm houses (Except development of townships, construction of residential/commercial premises, roads or bridges)
Role of FII
Act as highly specialized investors on behalf of others
Depository Receipts (GDRs), Foreign Institutional Investments and investments in offshore funds.
Before 1992, only Non-Resident Indians (NRIs) and Overseas Corporate Bodies were allowed to undertake portfolio investments in India. Thereafter, the Indian stock markets were opened up for direct participation by FIIs.
They were allowed to invest in all the securities traded on the primary and the secondary market.
Investment Limits
Equity Instruments
FII, on its own behalf, shall not invest in equity more than 10% of total issued capital of an Indian company. Investment on behalf of each sub-account shall not exceed 10% of total issued capital of an India company. For the sub-account registered under Foreign Companies/Individual category, the investment limit is fixed at 5% of issued capital. These limits are within overall limit of 24% / 49 % / or the sectoral caps a prescribed by Government of India / Reserve Bank of India.
Debt Instruments
For corporate debt the investment limit is fixed at US $ 500 million
Taxation
Nature of Income
Long-term capital gains Short-term capital gains Dividend Income Interest Income
Tax Rate
10% 30% Nil 20%
Economic Theory
Institutional investors as financial intermediaries Act as intermediaries between lenders and borrowers. Important in the functioning of the financial markets. Economies of scale imply that they increase returns on investments and diminish the cost of capital for entrepreneurs. Acting as savings pools, they also play a critical role in guaranteeing a sufficient diversification of the investors portfolios.
Their greater ability to monitor corporate behaviour as well to select investors profiles implies that
they help diminish agency costs
Types
Pension fund
Mutual fund
Investment trust - Collective Investment Unit trust and Unit Investment Trust Stocks and Bonds Investment banking High Net worth Investors Hedge fund Sovereign wealth fund - State-Owned Investment Fund Endowment fund - transfer of money or property donated to an institution like
charity,University
Insurance Companies
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