FOREIGN DIRECT INVESTMENT - Vinod Kothari

FOREIGNDIRECTINVESTMENT

Agenda

01BasicConceptOverview

02IllustrationsFDI, FPI and DI

03ProvisionEntry Route, Acquisition and Pricing

04ReportingandlateSubmissionFee,ApprovalRouteFC-GPR, FC-TRS, DI and LSF

05Budget2019Prime 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.

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Rules & Regulations;DIPP (now DPIIT) & RBI;FDI Policy & FEMA Regulation;Master Circular & Master Direction;Automatic Route & Approval Route;Foreign Direct Investment & Indirect

Foreign Investment; andRepatriable & Non-repatriable.

CapitalInstruments

Capital Instruments

under FDI

Equity shares

Share warrants

DebenturesPreference Shares

Convertible Notes

As per Para 4 of RBI- MasterDirection on Foreign Investmentin India the capital instrumentsare as follows:

FDIv/sFPI

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Investment in capital instruments by PROI

Listed company

in 10% or more of the post issue paid- up equity capital on

fully diluted basis

Foreign Direct Investment

below 10% of the post issue paid-up equity capital on fully diluted

basis

Foreign Portfolio Investment

Unlisted company

Foreign Direct Investment

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Manoj Inc (PROI)

E ltd (Listed/Unlisted

Entity)

(Non-repat)

A ltd

(Listed Entity)

B ltd

(Listed Entity)

D ltd

(Unlisted Entity)

C ltd

(Unlisted Entity)

10% on fullydiluted basis





DownstreamInvestment

Indirect foreign investment means Downstream Investment1. 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; oro 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.

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A Inc (PROI)

B Ltd (PRII)

C Ltd (PRII)

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

Answer: 60%

Case 2: What will be extent of indirect foreign investment in C Ltd if100 % is held by B Ltd? 80% 100% None of above

Answer: 80%

80%

60%

Provision

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EntryRouteandPermittedSector

Approval Route

Automatic Route

AcquisitionThrough Rights Issue or Bonus issue

ESOP or Sweat Equity Shares

Convertible Notes by Startup

Merger or demerger or amalgamation of Indian companies

PricingGuidelines Applicability

Non-Applicability

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FormFC‐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.

FormFC‐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.

FormDI 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.

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Amountinvolved in

reporting (in INR)

LateSubmissio

n Fee (LSF) as % of amountinvolved*

Maximum amount of LSFapplicable

Upto 10 million 0.05% INR 1 million or 300% of theamount involved, whichever is lower.

More than 10million

0.15% INR 10 million or 300% oftheamount involved, whichever islower.

The % of LSF will be doubled every twelve months

The LSF shall be applicable for the transactions undertaken on or after November 7, 2017.

The payment of LSF is an option for regularising reporting delays without undergoing the compounding procedure.

The late submission fee is for reporting delays only

The payment of LSF is an additional facility for regularising reporting delays without undergoing the compounding procedure..

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Application to be filed online

Foreign Investment Facilitation Portal

Whether Digitally signed

No Physical copy to be submitted

Whether one signed physical copy submitted within 5 days of communication

to DIPP

Date of online filing will be reference for calculation of time limit for disposal

if the signed physical copy is not filedwith the Competent Authority within 7 days of the

communication from DIPP, thedate of filing of the physical application would be reckoned as

the reference date forcalculation of time limits.

Yes No

YesNo

After receipt of proposal DIPP to circulate online

Whether proposal for Investment requiring security clearance

Whether any specific issues requiring DIPP clarification?

To RBI to comment from FEMA perspective Refer to Ministry of

Home Affairs and also forward to Ministry of External Affairs and Dept. of Revenue for

information & comments

Forward to Ministry of External Affairs and Dept of revenue for

information and contents

Refer to DIPP

Comments to be given to the concerned

Administrative Ministry/Department

Whether proposal involves total inflow of more than INR 5000

crores?

Yes 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/Departmentsand DIPP

No Yes

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Budget 2019

Liberalizing Sectoral

caps

Foreign Portfolio

Investments

Invt in Debt securities by

FPIs

Investment by Non-Resident

Indian (NRI) under PIS

Current Scenario

Mini Budget

By Burhanuddin DohadwalaExecutive

Vinod Kothari & Company

Documents

FOREIGN DIRECT INVESTMENT - Vinod Kothari