Escolar Documentos
Profissional Documentos
Cultura Documentos
Varieties of FDI
FDI is permitted via: Financial Collaborations Joint Ventures & Technical Collaborations. Capital markets via euro issues. Private placements or preferential issues.
FORMS
1) By Direction *Inward *Outward 2) By Target *Mergers and Acquisitions *Horizontal FDI *Forward Vertical FDI/Backward VerticalFDI
FORMS
3) By Motive *Resource-Seeking *Market-Seeking *Efficiency-Seeking *Strategic-Asset-Seeking
FDI Routes
Automatic Route FDI up to 100 per cent is allowed under the automatic route in all activities/sectors except where the provisions of the consolidated FDI Policy, issued by the Government of India from time to time, are attracted. FDI in sectors /activities to the extent permitted under the automatic route does not require any prior approval either of the Government or the Reserve Bank of India.
FDI Routes
Government Route FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB).
Prohibited sectors
FDI is prohibited under the Government Route as well as the Automatic Route in the following sectors: i) Retail Trading (except single brand product retailing) ii) Atomic Energy iii) Lottery Business
Prohibited sectors
iv) Gambling and Betting v) Business of Chit Fund vi) Nidhi Company
Prohibited sectors
vii) Housing and Real Estate business (except development of townships, construction of residential/commercial premises, roads or bridges. viii ) Manufacture of cigars , cheroots, cigarillos and cigarettes , of tobacco or of tobacco substitutes. ix) Atomic Energy, Railways
SECTOR Agriculture Tea Plantation Mining Coal & Lignite Petroleum & Natural gas
SECTOR
Defence Broadcasting, Cable & DTH Airport (Greenfield & Brownfield) Insurance Telecom
FDI
26% 26%,49%,49% 100%
ROUTE
Government All Government Automatic
Methods of FDI
A foreign company planning to set up business operations in India may: Incorporate a company as a Joint Venture or a Wholly Owned Subsidiary. Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company
Calculation of FDI
Investment in Indian companies can be made both by non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. An Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it.
Calculation of FDI
The indirect investment can also be a cascading investment i.e. through multilayered structure. It is also called Downstream Investment Total FDI = Direct + Indirect FDI Example
Calculation of FDI
If the indirect foreign investment is being calculated for Company X which has investment through an investing Company Y having foreign investment, the following would be the method of calculation: Where Company Y has foreign investment less than 50%- Company X would not be taken as having any indirect foreign investment through Company Y.
Calculation of FDI
Where Company Y has foreign investment of say 75% and: (I) invests 26% in Company X, the entire 26% investment by Company Y would be treated as indirect foreign investment in Company X; (II) Invests 80% in Company X, the indirect foreign investment in Company X would be taken as 80%
Calculation of FDI
Where Company X is a wholly owned subsidiary of Company Y (i.e. Company Y owns 100% shares of Company X), then only 75% would be treated as indirect foreign equity and the balance 25% would be treated as resident held equity. The indirect foreign equity in Company X would be computed in the ratio of 75(Indirect FDI): 25(Resident Equity) in the total investment of Company Y in Company X.
Who is an FII?
An institution established or incorporated outside India as a pension fund, mutual fund, investment trust, insurance company, or reinsurance company. A foreign government agency or foreign central bank. AMC/ trustee of a broad based fund outside India.
Who is an FII?
University Funds, Endowment Foundations, Charitable Trusts and Charitable Societies
Investment allowed
Securities in the primary and secondary markets including shares, debentures, and warrants of companies, unlisted, listed, or to be listed on a recognized stock exchange in India. Mutual funds schemes. Dated government securities Derivatives traded on a recognized stock exchange
Investment allowed
Commercial papers Security receipts Indian Depository Receipts
FII-Secondary Market
FIIs are required to allocate their investment between equity and debt instruments in the ratio of 70:30. However, it is also possible for an FII to declare itself a 100% debt FII. FIIs can buy/sell securities on Stock Exchanges
FII-Secondary Market
Trade on basis of taking and giving delivery of securities purchased or sold (except derivatives). Cannot buy more than 10% of issued capital. No carry forward is allowed. Keep margins prescribed by clearing house. Allowed in interest rate futures and infra bonds
FII-Secondary Market
SEBI registered FIIs/sub-accounts of FIIs can now invest in primary issues of Nonconvertible Debentures (NCDs)/ bonds to be listed only if listing of such bonds / NCDs is committed to be done within 15 days of such investment.
Participants
Custodian Bank Domestic Depository IDR holders.
ECB
External Commercial Borrowings (ECB) refer to commercial loans in the form of Bank loans, Buyers credit, Suppliers credit Securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares)
ECB
Availed of from non-resident lenders with a minimum average maturity of 3 years. ECB can be accessed under two routes, viz., (i) Automatic Route and (ii) Approval Route.
Automatic route
Eligible Borrowers Corporate Infrastructure Finance Companies (IFCs) except financial intermediaries, such as banks, financial institutions (FIs) Housing Finance Companies (HFCs) and NonBanking Financial Companies (NBFCs)
Automatic route
Units in SEZ. NGOs
Lenders:
International capital market Financial institutions Government owned development financial institutions Export credit agencies
Automatic route
Suppliers of equipments. Foreign collaborators. Foreign equity holders.
Automatic route
Max. limit in services sector $100 mn. Other than Services: $500mn. Maturity upto $20mn:3 yrs Maturity above $20 mn:5yrs Cost: For 3-5 yrs maturity: LIBOR+300 bp >5 yrs maturity: LIBOR+500 bp
Automatic route
Usage: For investment decisions & infrastructure building Funding of JVs, govt. disinvestment programme. Lending to NGOs & self help groups
Automatic route
Prohibited uses:
Capital markets , MMMFs Real estate Working capital
Approval Route
ECBs beyond 50% of owned funds of infrastructure finance cos. Banks and FIs participating in textile restructuring package. ECB for import of infrastructure equipment. SPVs set up to finance infrastructure projects. Cooperative societies involved in manufacturing.
Approval route
Corporates violating ECB policy and are under investigation. Amount: Additional ECB for ten yrs upto $250 mn above 500 mn level under automatic route. Cost: For 3-5 yrs maturity: LIBOR+300 bp >5 yrs maturity: LIBOR+500 bp
Approval route
End Uses & Prohibited uses: same as earlier