Understanding Foreign Direct Investment (FDI) Regulations
Explore the essential concepts and regulations surrounding Foreign Direct Investment (FDI) including FDI policy, FEMA regulations, capital instruments, equity shares, and the distinction between FDI and Foreign Portfolio Investment (FPI). Gain insights into FDI entry routes, acquisition strategies, pricing agendas, and the vision for a robust economy.
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Presentation Transcript
01 Basic Concept Overview 02 Illustrations FDI, FPI and DI 03 Provision Entry Route, Acquisition and Pricing Agenda 04 Reporting and late Submission Fee, Approval Route FC-GPR, FC-TRS, DI and LSF 05 Budget 2019 Prime Minister's vision of a 5 trillion dollar economy
Overview FERA & FEMA; Dealing in Foreign Exchange; Holding of Foreign Exchange; Export of Goods and Services; Capital Account transaction; Current Account transaction; Sectoral Caps; Capital instruments; Online Portals; Parties Involved- Indian Entity, Indian Company, NRI & OCI.
Basic Concept Rules & Regulations; DIPP (now DPIIT) & RBI; FDI Policy & FEMA Regulation; Master Circular & Master Direction; Automatic Route & Approval Route; Foreign Direct Investment & Indirect Foreign Investment; and Repatriable & Non-repatriable.
Equity shares Capital Instruments Convertible Notes Share warrants Capital Instruments under FDI As per Para 4 of RBI- Master Direction on Foreign Investment in India the capital instruments are as follows: Preference Shares Debentures
FDI v/s FPI Investment in capital instruments by PROI Text Title Text Title Place your own tet here Listed company Unlisted company 0 0 Text Title Text Title Place your own text here 02 02 below 10% of the post issue paid- up equity capital on fully diluted basis Foreign Direct Investment in 10% or more of the post issue paid- up equity capital on fully diluted basis Tet Title Tet Title Place your own text here 03 03 Foreign Direct Investment Text Title Text TitlePlace your own text here Foreign Portfolio Investment 04 04
A ltd Illustration 1 (Listed Entity) 10% on fully diluted basis Text Title Place your own tet here 0 10% on fully diluted basis 9% on fully diluted basis E ltd B ltd Text Title Place your own text here (Listed/Unlisted Entity) (Listed Entity) 02 Manoj Inc (PROI) (Non-repat) 8% on fully diluted basis 10% on fully diluted basis 03 Text TitlePlace your own text here 04 C ltd D ltd (Unlisted Entity) (Unlisted Entity)
Downstream Investment Indirect foreign investment means Downstream Investment 1. Investment in the capital instruments of another Indian company by an Indian entity which has received foreign investment and: o is not owned and not controlled by resident Indian citizens; or o is owned or controlled by persons resident outside India. Note: Ownership of an Indian company shall mean beneficial holding of more than 50 percent of the capital instruments of such company.
Illustration 2 Case 1: A Inc hold shares in B ltd (i.e. 80%), what will be extent of indirect foreign investment in C Ltd? 80% 60% 48% None of above A Inc (PROI) 80% B Ltd (PRII) Text Title Text Title Place your own tet here 0 0 60% C Ltd (PRII) Text Title Text Title Place your own text here 02 02 Answer:60% Case 2: What will be extent of indirect foreign investment in C Ltd if 100 % isheld byB Ltd? 80% 100% None of above Tet Title Tet Title Place your own text here 03 03 Text Title Text TitlePlace your own text here 04 04 Answer:80%
Entry Route and Permitted Sector Approval Route Automatic Route Acquisition Through Text Title Text Title Place your own tet here Rights Issue or Bonus issue 0 0 ESOP or Sweat Equity Shares Text Title Text Title Place your own text here 02 02 Convertible Notes by Startup Merger or demerger or amalgamation of Indian companies Tet Title Tet Title Place your own text here 03 03 Pricing Guidelines Applicability Text Title Text TitlePlace your own text here 04 04 Non-Applicability
Reporting Form FC-GPR Issuing capital instruments to a person resident outside India; Thirty days from the date of allotment of capital instruments; To be reported Form FC-GPR. Text Title Text Title Place your own tet here 0 0 Form FC-TRS PROI holding capital instruments in an Indian company on a repatriable basis and PROI holding capital instruments on a non-repatriable basis; and PROI holding capital instruments in an Indian company on a repatriable basis and a PRI. Within sixty days of transfer of capital instruments or receipt/ remittance of funds whichever is earlier. Text Title Text Title Place your own text here 02 02 Tet Title Tet Title Place your own text here 03 03 Form DI An Indian entity or an investment Vehicle making downstream investment in another Indian entity which is considered as indirect foreign investment for the investee Indian entity. Within 30 days from the date of allotment of capital instrument. Text Title Text TitlePlace your own text here 04 04
Delay in Reporting The LSF shall be applicable for the transactions undertaken on or after November 7, 2017. Amount involved in reporting(in INR) Late Maximum amount of LSF applicable Submissio n Fee (LSF) as % of amount involved* 0.05% The payment of LSF is an option for regularising reporting delays without undergoing the compounding procedure. Upto 10 million INR 1 million or 300% of the amount involved, whichever is lower. Text Title Text Title Place your own tet here 0 0 Text Title Text Title Place your own text here than 10 02 02 More million The late submission fee is for reporting delays only 0.15% INR 10 million or 300% of the amount involved, whicheveris lower. Tet Title Tet Title Place your own text here 03 03 The payment of LSF is an additional facility for regularising reporting delays without undergoing the compounding procedure.. Text Title Text TitlePlace your own text here The % of LSF will be doubled every twelve months 04 04
Procedure Under Approval Route Foreign Investment Facilitation Portal Application to be filed online Whether Digitally signed Whether one signed physical copy submitted within 5 days of communication to DIPP No Yes No Physical copy to be submitted No Yes if the signed physical copy is not filed with the Competent Authority within 7 days of the communication from DIPP, the date of filing of the physical application would be reckoned as the reference date for calculation of time limits. Date of online filing will be reference for calculation of time limit for disposal
Whether proposal for Investment requiring security clearance Whether any specific issues requiring DIPP clarification? After receipt of proposal DIPP to circulate online Yes No Yes To RBI to comment from FEMA perspective Forward to Ministry of External Affairs and Dept of revenue for information and contents Refer to DIPP Refer to Ministry of Home Affairs and also forward to Ministry of External Affairs and Dept. of Revenue for information & comments Comments to be given to the concerned Administrative Ministry/Department Whether proposal involves total inflow of more than INR 5000 crores?
No Yes Competent Authority shall place the same for consideration of Cabinet Committee on Economic Affairs within the above timelines. After the receipt of the decision of Cabinet Committee on Economic Affairs, approval letter shall be issued within 1 week. Scrutinize proposal and documents, ask queries, documents, if any, online or by email Approval/ Rejection letter will be sent online by the competent authority to the applicant, consulted Ministries/Departments and DIPP
Liberalizing Sectoral caps Budget 2019 Budget 2019 Investment by Non- Resident Indian (NRI) under PIS Foreign Portfolio Investments Invt in Debt securities by FPIs
Mini Budget Current Scenario
By Burhanuddin Dohadwala Executive Vinod Kothari & Company
