Fdi and Fii Presentation

7/31/2019 Fdi and Fii Presentation

1/25

5/28/12

IMPACT OF FDI AND FII ON INDIANBUSINESS ENVIRONMENT

PRESENTED BY:

SRI VIDYA

SUHAIL

RISHIKA

ARJUN

TISONTHARANEE 11


2/25

5/28/12

DEFINITIO N OF FDI

Foreign direct investment (FDI) orforeign investment refers to long term

participation by country A into country B.It usually involves participation inmanagement, joint-venture, transfer oftechnology and expertise.

5/28/12 22


3/25

5/28/12

Methods

The foreign direct investor may acquire voting power ofan enterprise in an economy through any of the

following methods:

By incorporating a wholly owned subsidiary orcompany

By acquiring shares in an associated enterprise

Through a merger or an acquisition of an unrelatedenterprise

Participating in an equity joint venture with anotherinvestor or enterprise

33


4/25

5/28/12

Why India?

Liberal, largest democracy, PoliticalStability Second largest emerging market (US$

2.4 trillion)

Skilled and competitive labors force highest rates of return on investment one hundred of the Fortune 500 have R

& D facilities in India Second largest group of software

developers after the U.S. lists 6,500 companies on the Bombay

Stock Exchange (only the NYSE has44


5/25

5/28/12

Why India (cont.)

World's fourth largest economy & second largestpharmaceutical industry

growth over the past few years averaging 8% has a middle class estimated at 300 million out of

a total population of 1 billion Destination for business process outsourcing,

Knowledge processing etc. Second largest English-speaking, scientific,

technical and executive manpower Low costs & Tax exemptions in SEZ Tax incentives for IT , business process

outsourcing and KPO companies

55


6/25

5/28/12

Government policies

Automatic Route

Prior Permission (FIPB)

66


7/255/28/12

Investing in India EntryRoutes

77

Investing in India

Automatic Route Prior Permission(FIPB)

General ruleNo prior permission

requiredOnly information totheReserve Bank of Indiawithin 30 days ofinflow/Issue of shares

By exceptionPrior Government

Approval needed

Decision generallyWithin 4-6 weeks


8/255/28/12

FDI IN DIFFERENT SECTORS

In June 2010, India's Telecom Regulatory Authority ofIndia , which also regulates broadcasters, hadrecommended higher foreign direct investment in thebroadcasting sector, particularly in direct-to-home(DTH) and cable network operators and FM radio.

The $12 billion Indian media and entertainmentindustry is forecast to grow 13 percent for the nextfive years, according to a FICCI-KPMG report.

FDI upto 26% in the Insurance sector is allowed on

the automatic route subject to obtaining licence fromInsurance Regulatory and Development Authority(IRDA)

Petroleum Product Pipelines 100%,

Subject to and under the Government Policy and


9/255/28/12

Telecommunications

In basic, Cellular, Value Added Services, and GlobalMobile Personal Communications by Satellite, FDI is

limited to 49% subject to licencing and securityrequirements and adherence by the companies (who areinvesting and the companies in which the investment isbeing made) to the license conditions for foreign equitycap and lock-in-period for transfer and addition of equityand other license provisions.

Air Transport Services (Domestic Airlines)

(100% for NRIs 49% for others)No direct or indirect equity participation by foreignairlines is allowed.

99


10/255/28/12

Special economic zone

All manufacturing activities except

(i) Arms and ammunition, explosives andallied items of defence equipments, defenceaircrafts and warships;

(ii) Atomic substances, Narcotics and

Psychotropic Substances and HazardousChemicals;

(iii) Distillation and brewing of Alcoholic

drinks, and(iv) Cigarette/cigars and manufacturedtobacco substitutes


11/255/28/12

Documents Required for Foreign

Direct Investments-

11

Application Form

Detailed information on the foreign investor orcollaborators stating their parent enterprises andaffiliated firms

Copies of the memorandum of collaborations made by

the foreign investors Detailed information on the Joint Venture firms or

technical collaborators along with information on theirparent enterprise, promoters, and affiliated firms

Companies aiming at establishing multi sectoralactivities must present their details on the alreadyexistent activities with four digit NIC code.

In case of any investments being carried out in aholding company, information about downstreaminvestments are to be presented


12/255/28/12

Copies of the earlier approved proposals by FIPB orSIA or RBI connected with the current one

The board resolution of the investor company and theapproval of transferred shareholder while transferring

the existent equity

Before and after investments, the detailedinformation on shareholders of the investor concern

In case of indirect foreign investments, the details of

the indirect route and the names of the foreigncompanies along with their shareholders

Justification for higher payments in terms ofpayments for technology or trademark or brand name

which require FIPB approval under automatic route Declaration from the investors stating their details

Detailed information on the existing ventures orenterprises

Remarks from Indian partners in case of the 12


13/255/28/12

SECTORS IN WHICH FDI IS ALLOWED

13

n

Retailn I.Tn Oil & Energyn Power sectorn Pharmaceuticals & Chemicals

n

Real staten Miningn Mobile Sectorn Automobilen Telecommunication


14/255/28/12

FDI is not permitted in thefollowing industrial sectors:

Arms and ammunition.

Atomic Energy.

Railway Transport.Coal and lignite.

Mining of iron, manganese, chrome,

gypsum, sulphur, gold, diamonds,copper, zinc

5/28/12 14


15/255/28/12

Major Investments

Companies Sector Investment

Walmart, Retail US$ 10 Billion

Intel Corp. I.T US$ 40 Billion

British & cairn Oil & Energy US$ 2 Billion

Essar power Power sector US$ 2 Billion

Toyota Automobile US$ 10.51 Billion

Panasonic Telecommunication

US$ 200 million

15


16/255/28/12

What is an FII??

Foreign Institutional investors are

organizations which pool large sums ofmoney and invest those sums insecurities, real property and other

investment assets.Their role in the economy is to act as

highly specialized investors on behalf ofothers

16


17/255/28/12

An institution established outside India,which invests in securities traded on themarkets in India e.g.

Pension FundsMutual Funds Investment Trust Insurance companies Endowment FundsUniversity Funds

Foundations or Charitable TrustsAsset Management Companies Power of Attorney HoldersBank

17


18/25

5/28/12

FII Vs FDIFII is Foreign Institutional Investment: It

is investment made by foreign Mutual

Funds in the Indian Market.FDI is Foreign Direct Investment: It isthe investment made by Foreign

Multinational comapnies in India.

The Foreign Institutional Investor is alsoknown as hot money as the investorshave the liberty to sell it and take itback. But in Foreign Direct Investment,this is not possible.

18


19/25

5/28/12

Both FDI and FII is related to investment ina foreign country. FDI is an investmentthat a parent company makes in a foreigncountry. On the contrary, FII or ForeignInstitutional Investor is an investmentmade by an investor in the markets of a

foreign nation. In FII, the companies only need to get

registered in the stock exchange to makeinvestments. But FDI is quite differentfrom it as they invest in a foreign nation.

FDI is more preferred to the FII as they areconsidered to be the most beneficial kind

of foreign investment for the whole 19


20/25

5/28/12

Foreign Institutional Investors (FII)

FIIs may invest in:

securities in the primary and secondarymarkets (shares, debentures, warrants oflisted and unlisted companies)

units issued by domestic mutual funds

dated Government securities

derivatives traded on a recognized stockexchange

commercial paper

debt instruments provided a 70/30equity/debt ratio is maintained

20


21/25

U i B d t


22/25

Click to edit Master subtitle style

5/28/12

Union Budget

2011The budget proposes a number of steps to simplify FII & FDIregime.

Government is focusing on liberalizing FDI policy, and islooking at increasing the FDI inflow in insurance, pension andbanking sectors, among others. Legislation related to insurancesector would increase the FDI limit to 49 per cent from the

current 26 per cent


23/25

5/28/12

As per the budget, FIIs are allowed to

invest in mutual funds, unlisted bondswith minimum lock in period of 3 yrs.

To increase investments toinfrastructure sector, the FM raised thecap on foreign investments intocorporate bonds. FII limit for

investment in corporate bonds withresidual maturity of over 5 years issuedby companies in the infrastructure

sector has been is being raised to $25


24/25

5/28/12

The total limit for FIIs in corporate bondshas been increased to US $ 40 billion.

Also, portfolio investment would be

permitted in SEBI registered mutualfunds from foreign subscriptions

FM proposed to allocate Rs 6,000 cr for

some PSU banks to ensure that they areable to attain a minimum of 8 per cent

Tier-I capital.


25/25

5/28/12 25

ThankYou