2.2.1 Foreign portfolio investors Foreign venture capital investors Depository receipts NRI/PIO investors

Transcription

1

2 Contents 1. Setting up Business in India 1.1. Overview 2. Types of Foreign Participation 2.1. Overview 2.2. Understanding investors/ instruments Foreign portfolio investors Foreign venture capital investors Depository receipts NRI/PIO investors Investment vehicles Infrastructure Investment Trusts (InvITs) Real Estate Investment Trusts (REITs) Alternate Investment Funds 3. Foreign Direct Investment in India 3.1. Understanding FDI 3.2. Prohibited Sectors 3.3. Institutional Set-up 3.4. Eligible Investors 3.5. Eligible Investee Entities 3.6. Types of Instruments for FDI 3.7. Sectoral Caps (%) and Entry Routes 3.8. Reporting requirements 3.9. Issue and Transfer of Shares Conversion of ECB/Lump sum fee/royalty etc. into Equity Repatriation of dividends and interest Remittance of proceeds from sale and winding up 4. Frequently Asked Questions (FAQs)

3 Abbreviations (1/3) Act or the Act Companies Act, 2013 AD AF ADR AIF BO CA CCEA CCFI CCS CoI DDT DEA DP DR DSIM ECB EXIM FCCB FCNR (B) FDI FEMA FII FIPB FPI FVCI Authorised Dealer Angel Fund American Depository Receipts Alternative Investment Fund Branch Office Chartered Accountant Cabinet Committee on Economic Affairs Cabinet Committee on Foreign Investment Cabinet Committee on Security Certificate of Incorporation Dividend Distribution Tax Department of Economic Affairs Depository Participant Depository Receipt Department of Statistics and Information Management External Commercial Borrowing Export-Import Foreign Currency Convertible Bond Foreign Currency Non-Resident Account Foreign Direct Investment Foreign Exchange Management Act Foreign Institutional Investor Foreign Investment Promotion Board Foreign Portfolio Investor Foreign Venture Capital Investor

4 Abbreviations (2/3) GDR GoI InvITs JV KYC LLP LO MoA MoU NBFC NGO NOC NPO NRE NRE Account NRI NRO Account PAN PIB PIO PO PSU RBI REIT RoC Global Depository Receipts Government of India Infrastructure InvestmentTrusts Joint Venture Know Your Customer Limited Liability Partnership Liaison Office Memorandum of Association Memorandum of Understanding Non-Banking Financial Corporation Non-Government Organization No Objection Certificate Non-Profit Organization Non-Resident Entity Non-Resident (External) Rupee Account Non-Resident Indian Non-Resident Ordinary Rupee Account Permanent Account Number Press Information Bureau Person of Indian Origin Project Office Public Sector Undertaking Reserve Bank of India Real Estate Investment Trust Registrar of Companies

5 Abbreviations (3/3) SEBI SEZ SIA SME SMS TDR TDS VAT VC WOS Securities and Exchange Board of India Special Economic Zone Secretariat for Industrial Assistance Small and Medium-sized Enterprise Short Message Service Transferable Development Rights Tax Deducted at Source Value-Added Tax Venture Capital Wholly-owned Subsidiary

6 1 Setting up Business in India

7 Setting up Business in India Foreign Investor can commence business in India as: An Indian Company OR A Foreign Company* OR Limited Liability Partnership Joint Venture Wholly Owned Subsidiary JV as (i) Private Limited or (ii) Public Limited Company, s.t. Companies Act, 2013 Permissible in sectors where 100% FDI is permitted Liaison Office Branch Office Project Office To represent parent company in India Activities such as Export Import of goods; research, consultancy etc. Activities as per contract to execute project LLP Subject to provisions of LLP Act, 2008 FDI permitted under automatic route in LLPs operating in sectors/activitie s where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions *Incorporate company in Indias.t. sectoral caps andrequisite approvals RBI guidelines regarding establishment of LO/BO/PO: Entry of Foreign Investors in India

8 2 Types of Foreign Participation

9 Overview of Foreign Participation Foreign participation in India Investment in unlisted/ listed companies (except through Stock Exchange) Investment in listed companies through stock exchange ADRs and GDRs* Investmen t by NRIs/ PIOs Investment Vehicle (REITs, INVITS, AIF) Repatriable Non- repatriable Foreign Direct Investment (FDI) Foreign Venture Capital Investor Foreign Portfolio Investors (FPI) Note: An investor can participate in Indian econom y by either commencing business in India (forms explained earlier in slide 7) via, say the FDI route as outlined above or can invest in the financial markets via a host of available financial instruments. A few of these have been enumerated in the subsequent slides. In particular, FDI has been explained in detail in Section 3 of this document.

10 Types of Foreign Participation Understanding Investors/ Instruments Comments Foreign Portfolio Investors (FPI) Under the SEBI FPI Regulations, 2014, Foreign Institutional Investors (FIIs) or sub accounts and Qualified Foreign Investors (QFIs) were merged into a single category, referred to as FPIs Category I FPI- Government and Government related investors; Category II FPI broad based funds, banks, asset management companies, university and pension funds etc; Category III FPI- others such as charitable societies, trusts, foundations etc. Purchase of equity shares of each company by a single FPI or an investor group shall be below 10% of total issued capital of the company No person can buy, sell or deal in securities as FPI unless obtained a Certificate of Registration from a Designated Depository Participant (on behalf of SEBI)- Application in Form A along with prescribed fees Eligib ility- Conditions such as person non resident in India, not a NRI; applicant resident of country whose securities market regulator signatory to International Organization of Securities Commission's Multilateral MoU or a signatory to bilateral MoU; applicant legally permitted to invest in securities outside the country of its incorporation ; track record of applicant etc. Bank Account: Appoint a branch of a bank authorized by RBI for opening a foreign currency denominated account and special Non Resident Rupee account beforemaking any investments in India Compliance with acts, rules and regulations issued by Designated Depository Participant or SEBI

11 Types of Foreign Participation Understanding Investors/ Instruments Foreign Portfolio Investors (FPI) Permissible securities A FPI is permitted to invest only in the following securities: a) Securities in the primary and secondary markets including shares, debentures and warrants of companies, listed or to be listed on a recognized stock exchange in India; b) Units of schemes floated by domestic mutual funds, whether or not listed on recognized stock exchange c) Units of schemes floated by a collective investment scheme; d) Derivatives traded on a recognized stock exchange; e) Treasury bills and dated government securities; f) Commercial papers issued by an Indian company; g) Rupee denominated credit enhanced bonds; h) Security receipts issued by asset reconstruction companies i) Perpetual debt instruments and debt capital instruments, as specified by the RBI j) Listed and unlisted non-convertible debentures/bonds issued by an Indian company in the infrastructure sector k) Non-convertible debentures or bonds issued by NBFC categorized as Infrastructure Finance Companies (IFCs) by RBI l) Rupee denominated bonds or units issued by infrastructure debt funds; m) Indian depository receipts; and n) Such other instruments specified by the Board from time to time.

12 Types of Foreign Participation Understanding Investors/ Instruments Comments Foreign Venture Capital Investor Venture capital fund means a Fund established in the form of a Trust, a company including a body corporate and registered under SEBI (Venture Capital Fund) Regulations, 1996, which (i) has a dedicated pool of capital; (ii) raised in the manner specified under the Regulations; and (iii) invests in accordance with the Regulations Regulated under the SEBI (Foreign Venture Capital Investor) Regulations, 2000 Considerations for Eligibility: applicant s track record financial soundness and competency; approval by RBI; whether investment company/ trust/ pension fund/ mutual fund etc. Conditions and criteria : Disclose strategy to SEBI, at least 66.67% investable funds in unlisted equity shares/ equity linked instruments Registration Cert ificate: Applicat ion to SEBI in Form A along with the application fee Appoint a domestic custodian and bank Compliance requireme nt- Maintain books of accounts, records, records and documents for 8 years

13 Types of Foreign Participation Understanding Investors/ Instruments Comments Depository Receipts Negotiable securities representing INR denominated equity shares (held as a deposit by custodian bank) of a company Issued outside of India by a Depository bank on behalf of the company Traded on stock exchanges in U.S., Singapore, Luxembourg etc. - DRs listed and traded in US markets- American Depository Receipts (ADRs), elsewhere Global Depository receipts (GDRs) Governed by FEMA notification 330/2014- RB, issued by RBI A person can issue DRs, if it is eligible to issue eligible instruments to person resident outside India unde r Schedules 1, 2, 2A, 3, 5 and 8 of Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. The eligible securities shall not be issued or transferred to a foreign depository for the purpose of issuing DRs at a price less than the price applicable to a corresponding mode of issue or transfer of such securities to domestic investors under FEMA, 1999 as amended from time to time. DRs issued shall be re ported to RBI in prescribed formats

14 Types of Foreign Participation Understanding Investors/ Instruments Investment by NRIs/PIOs A Non-resident Indian (NRI) is a person resident outside India who is a citizen of India. A Person of Indian Origin (PIO) is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions: (i) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (ii) Who belonged to a territory that became part of India after the 15th day of August, 1947; or (iii) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or (iv) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person refe rred to in clause (a) or (b) or (c). PIO included Overseas Citizen of India (OCI) Major accounts permitted for Non-Resident include: NRE, NRO and FCNR (B) accounts- Prior approval of RBI for accounts by individuals/ entities of Pakistan and Bangladesh NRI can invest in capital of Indian companies on nonrepatriation basis provided: (i) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/Authorized banks (ii) entity is not engaged in agricultural/plantation or real estate business or print media sector (iii) amount invested not eligible for repatriation outside India For investments on repatriable basis, provisions of FDI policy apply Individual holding is restricted to 5 per cent of the total paidup capital both on repatriation and non-repatriat ion basis and aggregate lim it cannot exceed 10 per cent of the total paid-up capital both on repatriation and non-re patriation basis. However, NRI holding can be allowed up to 24 per cent of the total paid-up capital both on repatriation and non-repatriation basis provided the company passes a special resolution NRIs residents in Nepal and Bhutan perm itted to invest in the capital of Indian com panies on repatriation bas is, s.t. condition that the amount of consideration for such investment shall be paid only by way of inward remittance in free foreign exchange through normal banking channels.

15 Types of Foreign Participation Understanding Investors/ Instruments Investment Vehicles Foreign investments permitted under AUTOMATIC ROUTE An entity registered / incorporated in and a citizen of Pakistan/ Bangladesh not permitted Infrastructure Investment Trusts (InvITs) Governed by the SEBI (InvIT) Regulations, 2014 Structure: Sponsor; trustee, Investment manager and project manager Cumulative project size INR 500 cr; Issue size INR 250 cr Sponsors to set up InvTS (max 3); 3 years min lock in period for sponsors Minimum distribution- 90% of distributable cash flow of InvITs/ SPVs Permitted for any project in infrastructure sector- (as defined by vide Ministry of Finance Notification dated Oct and any amendments/additions made thereof)

16 Types of Foreign Participation Understanding Investors/ Instruments Investment Vehicles Foreign investments permitted under AUTOMATIC ROUTE An entity registered / incorporated in and a citizen of Pakistan/ Bangladesh not permitted Real Estate Investment Trusts (REITs) Governed by the SEBI (REITs) Regulations, 2014 Set up as a trust under Indian Trusts Act, 1882 and registered with SEBI Parties: Sponsor, Manager and Trustee (registered with SEBI) Investments directly or indirectly through SPVs (must have holding interest)- cannot invest in vacant or agriculture land or mortgages other than mortgage backed securities Mandatory distribution of at least 90% of net distributable cash flows to investors on a half yearly bas is and at least 90% of the sale proceeds from sale of assets to unit holders, unless reinvested in another property.

17 Types of Foreign Participation Understanding Investors/ Instruments Investment Vehicles Foreign investments permitted under AUTOMATIC ROUTE An entity registered / incorporated in and a citizen of Pakistan/ Bangladesh not permitted Alternative Investment Funds (AIFs) Governed by the SEBI (AIFs) Regulations, 2012 Certificate of registration from SEBI Pooling or raising of private capital from institutional or high net worth individuals (HNI) and include private equity fund, venture capital fund, angel investors, etc. Key conditions- Min size of AIF - INR 200 mn; Minimum investment amount by an investor should be 0.1% of the fund size, subject to a minimum of INR 10 million; min 5% investment from sponsor (locked-in) 3 categories Category I- invest in start-up or early stage ventures or social ventures or SMEs or infrastructure. Includes venture capital funds, SME funds, social venture funds, infrastructure funds, angel funds, etc.; Category II- private equity funds or debt funds for which no specific incentives or concessions are given by the government or any other regulator; Category III- hedge funds, open ended funds etc. which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives Control of the AIF should be in the hands of sponsors and managers/ investment managers, with the general exclusion of others

18 3 Foreign Direct Investment in India

19 Foreign Direct Investment (FDI) in India Understanding FDI Foreign Direct Investment (FDI) means investment by non-resident entity/person resident outside India in the capital of an Indian company FDI entails acquiring a lasting interest outside of the economy of the investor and includes capital investments from abroad in the productive capacity of a Nation in the form of: (i) incorporating a wholly owned subsidiary or company anywhere (ii) acquiring shares in an associated enterprise (iii) merger or an acquisition of an unrelated enterprise (iv) equity joint venture with another investor or enterprise Government of India has permitted foreign investment in almost all sectors with a few exceptions, for instance in sectors such as atomic energy, lottery business, and chit funds etc. where FDI is completely prohibited. For other sectors, FDI is either 100% permitted or partially permitted. In the permitted sectors, subject to sectoral caps, FDI may be via 2 routes: (i) Automatic route or (ii) Government route i.e. where prior approval of GoI is required.

20 Foreign Direct Investment (FDI) Prohibited Sectors Lottery Business including Government/private lottery, online lotteries, etc.* Gambling and Betting including casinos* Chit funds Nidhi company Trading in Transferable Development Rights (TDR) Real Estate Business or Construction of farm houses* Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes Sectors not open to private sector investmentatomic energy, railway operations (other than permitted activities mentioned in para 5.2, Consolidated FDI policy, June 07, 2016) Notes *Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities **Real estate business shall not include development of townshops, construction of resident ial/ commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations, 2014

21 Foreign Direct Investment (FDI) in India Institutional and Regulatory Set-up FDI in India is regulated under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations,2000 (Original notification is available at Subsequent amendment notifications are available at Besides Foreign Exchange Management Act, 1999, FDI is subject to other regulations as per Reserve Bank of India (RBI), Foreign Investment Promotion Board (FIPB) (DEA, Ministry of Finance) and Department of Industrial Policy and Promotion (Ministry of Commerce and Industry) FIPB comprises of (i) Secretary to Government, Department of Economic Affairs, Ministry of Finance- Chairperson; Secretary to Government, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry; Secretary to the Government, Department of Commerce, Ministry of Commerce and Industry; Secretary to Government, Economic Relations, Ministry of External Affairs The procedural instructions are issued by the Reserve Bank of India vide A.P. (DIR Series) Circulars. The regulatory framework, over a period of time, thus, consists of Acts, Regulations, Press Notes, Press Releases, Clarifications, etc. The level of approvals for cases under the Government route are summarized below: Equity inflow of and below INR 5000 crore Minister of Finance (in-charge of FIPB) Government Approval Route Equity inflow of more than INR 5000 crore + Cases referred to CCEA by FIPB Cabinet Committee on Economic Affairs (CCEA)

22 Foreign Direct Investment (FDI) in India Application for FIPB Approval 1 Online registration at: 2 Submission of duly signed printout of the application with following prescribed documents to Facilitation Counter, North Block within 10 days of electronic submission Illustrative list of documents required : Summary of proposal on company (applicant) letterhead, Certificate of Incorporation (COI), Memorandum of Association(MoA), Board Resolution, Audited Financial Statement and Income Tax Return of Last Financial Year, Article of Association, LLP Draft; LLP Agreement, Passport Copy/ Identification Proof etc. (list at 3 As soon as the physical copy of proposal and documents are received, user will receive /sms alerts and proposal will be forwarded to FIPB for further processing. During the processing stage user will get /sms alert at specific stages. 4 Application discussed and decision taken in FIPB meeting 5 Decision communicated to applicant via Press Release or Approval/ rejection Letters Intimation to RBI by AD-Category I bank on receipt of FDI Plain paper applications carrying all relevant details are also accepted. Application can be made in Form FC-IL, which can be downloaded from - No fee is payable Link to Forms

23 Foreign Direct Investment (FDI) in India Eligible Investors Any Non resident Entity can invest subject to FDI policy (except in prohibited sectors) NRI resident in and Citizens of Nepal & Bhutan permitted to invest on repatriation basis (amount of consideration for such investment shall be paid only by way of inward remittances through normal banking channels) Erstwhile OCBs incorporated outside India can make fresh FDI investments as incorporated non-resident entities (prior approval of GoI if through Government route; RBI if through Automatic route) Company, trust or partnership firm incorporated outside India and owned and controlled by NRIs Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI) Registered FIIs/ FPIs/ NRIs as per Schedules 2, 2A and 3 respectively of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 can invest /trade through a registered broker of Indian Companies on recognized stock exchanges Citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under Government route Citizen of Pakistan or entity incorporated in Pakistan can invest only under Government route in sector/ activities other then defense, space & atomic energy and prohibited sector/ activities FII and FPIs may invest in capital of Indian companies under the Portfolio Investment Scheme which limits individual holding to below 10% and aggregate limit of FII/FPI investment to 24% (this may be increase d to the sectoral cap through resolution of Board of Directors followed by a Special Resolution) SEBI registered Foreign Venture Capital Investor (FVCI)

24 Foreign Direct Investment (FDI) in India Eligible Investee Entities Indian Companies can issue capital against FDI NRI/PIO resident outside India can invest in Partnership Firm/ Proprietary Concern Non Repatriation Basis Amount invested authorized dealer/ authorized banks Firm/ proprietary concern not engaged in agricultural/plantation/r eal estate business/ print media sector Amount invested not eligible for repatriation outside India Investment by NRI/PIO/OCI on non repatriable bas is to be treated as domestic investment Repatriation Basis Prior perm ission of RBI application to be decided in consultation with the GoI Non Residents (other than NRI/PIO) can invest in Partnership Firm/ Proprietary Concern Make an application and seek prior approval of RBI for making investment in capital of a firm or proprietorship concern or any association of persons in India NRI/PIO not allowed to invest in firm/ proprietorship concern not engaged in agricultural /plantation or real estate business or print media sector

25 Foreign Direct Investment (FDI) in India Eligible Investee Entities Trusts Limited Liability Partnerships (LLPs) Investment Vehicle FDI not permitted in trusts other than VCF registered and regulated by SEBI and Investment Vehicle FDI permitted under automatic route in LLPs in sectors where 100% FDI allowed through automatic route and there are no FDI linked performance conditions FDI in LLP s.t. compliance of conditions of the LLP act Investment vehicle registered and regulated under relevant regulations framed by SEBI or any other authority designated for the purpose (incl. REITs, Invites, AIFs etc.) permitted to receive foreign investment from person reside nt outside India

26 Foreign Direct Investment (FDI) in India Types of Instruments for FDI Equity DRs and FCCBs Others Indian companies can issue Equity Shares; Fully Compulsorily and Mandatorily Convertible Debentures and Fully, Compulsorily and Mandatorily Convertible Preference Shares Issue of Depository Receipts and Foreign Currency Conve rtible Bonds counted towards FDI Warrants and Partly Paid Shares Comments Price at the time of conversion should not be less than the fair value worked out at the time of issuance Optionality clauses allowed s.t. conditions : Minimum lock-in period: 1 year Exit (s.t. FDI policy provis ions) without any assured return FCCBs/DRs may be issued in accordance with Scheme for issue of Foreign Currency Convertible Bonds, Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and DR Scheme 2014 respectively, as per the guidelines issued by the GoI A person can issue DRs, if it is eligible unde r Schedules 1, 2, 2A, 3, 5 and 8 of Notification No. FEMA 20/2000- RB dated May 3, 2000 Under FEMA 1999, price of eligible securities for purpose of issuing DR should not be less than the price of a corresponding mode of issue or transfer of such securities to domestic investors s.t. T&C as stipulated by RBI in this behalf from time to time Other types of Preference shares/debentures i.e. non-convertible, opt ionally convertible or part ially convertible for issue of which funds have been receive d on or after May 1, 2007 are cons idered as debt- Hence, norms related to ECB apply

27 Foreign Direct Investment (FDI) in India Sectoral Caps (%) and Entry Routes Sector/ Activity Automatic Approval Government Approval Notes Agriculture & Animal Husbandry 100 Floriculture, Horticulture, Apiculture and Cultivation of Vegetables & Mushrooms under controlled conditions Development and Production of seeds and planting material Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture Services related to agro and allied sectors Besides the above, FDI not allowed in any other agricultural sector/ activity **PIB print release dated 20 June, 2016: FDI in Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture and Apiculturerequirement of 'Controlled Conditions' removed Plantation 100 Tea sectorincluding tea plantations Coffee plantations Rubber plantations Cardamom plantations Palm oil tree plantations Olive oil tree plantations Besides the above, FDI not allowed in any other plantation sector/ activity Mining 100 *Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities 100%, Government Route For detailed clarifications/ exceptions, please refer to Consolidated FDI Policy, effective from June 07, 2016

28 Foreign Direct Investment (FDI) in India Sectoral Caps (%) and Entry Routes Sector/ Activity Automatic Approval Government Approval Notes Petroleum and Natural Gas 100 *Petroleum refining by the PSU without any disinvestment or dilution of domestic equity in existing PSUs 49%, Automatic Trading of Indian produced/man ufactured food products % FDI under the government route is allowed for trading, including through e-commerce, in respect of food products manufactured and/or produced in India. Broadcasting Content Services 0 49 *Up-linking of Non- News & Current Affairs TV Channels/ Downlinking of TV Channels- 100%, Automatic Defence *Above 49% under the Government approval route on case to case basis (Wherever it is likely to result in access to modern technology or for other reasons to be recorded) **PIB print release dated 20 June, 2016: Condition of state-of-art technology removed; FDI limit also made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959 For detailed clarifications/ exceptions, please refer to Consolidated FDI Policy, effective from June 07, 2016

29 Foreign Direct Investment (FDI) in India Sectoral Caps (%) and Entry Routes Sector/ Activity Automatic Approval Government Approval Notes Print Media- Newspapers, Periodicals, Indian Editions of Foreign Magazines 26 Print Media- Scientific/ Technical Magazines, Specialty Journals; Facsimile editions of foreign newspapers 100 Civil Aviation - Greenfields/ Brownfields 100 Air Transport Services- Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline; Regional Air Transport Service Foreign Airlines allowed to invest in capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital Air Transport Services- Non Scheduled Air Transport Service/ Helicopters services/ seaplane services requiring DGCA approval 100 Other Services under Civil Aviation Sector 100

30 Foreign Direct Investment (FDI) in India Sectoral Caps (%) and Entry Routes Sector/ Activity Construction Development: Townships, Housing, Built-up Infrastructure Satellites Establishment and Operations Automatic Approval 100 Government Approval 100 Private Security Agencies Telecom Services Trading 100 E-Commerce Activities 100 Single Brand Product Retail Trading Multi Brand Retail Trading Notes FDI not permitted in entity engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs) 100% FDI under automatic route is permitted in marketplace model of e-commerce FDI is not permitted in inventory based model of e- commerce PIB print release dated 20 June, 2016: Local sourcing norms and sourcing regime for entities in this sector, and having state-of-art and cutting edge technology conditions have been relaxed for 3 years and 5 years respectively In specified states

31 Foreign Direct Investment (FDI) in India Sectoral Caps (%) and Entry Routes Sector/ Activity Automatic Approval Duty Free Shops 100 Railway Infrastructure 100 Government Approval Notes Duty Free Shop entity shall not engage into any retail trading activity in the Domestic Tariff Area of the country Proposals involving FDI beyond 49% in sensitive areas from security point of view, will be brought by the Ministry of Railways before the Cabinet Comm ittee on Security (CCS) for consideration on a case to case basis Credit Information Companies Infrastructure Companies in Securities Market No non-resident investor/ entity, including pers ons acting in concert, will hold more than 5% of the equity in commodity exchanges Insurance 49 Pension Sector 49 Power Exchanges 49 No non-resident investor/ entity, including pers ons acting in concert, will hold more than 5% of equity in these companies

32 Foreign Direct Investment (FDI) in India Sectoral Caps (%) and Entry Routes Sector/ Activity White Label ATM Operations Automatic Approval 100 Government Approval Notes Non Banking Financial Institutions 100 Pharmaceuticals - Greenfields Pharmaceuticals - Brownfields Asset Reconstruction Companies Banking - Private Sector Except in regard to a wholly-owned subsidiary / branch office of a foreign bank Banking - Public Sector 20

33 Foreign Direct Investment in India Sectoral Caps and Entry Routes* Pharmaceuticals - Greenfields White Label ATM Operations Asset Reconstruction Companies Duty Free Shops Trading Construction Development: Townships, Housing, Built- Air Transport Services- Non Scheduled Air Transport Automatic Government Approval No FDI Broadcasting Carriage Services Mining Agriculture & Animal Husbandry Power Exchanges Insurance Banking - Private Sector Telecom Services Air Transport Services- Scheduled Air Transport Service/ Banking - Public Sector Satellites Establishment and Operations Print Media- Newspapers, Periodicals etc. Trading of Food products manufactured or produced in 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% *Pl. refer to latest FDI policy for exceptions/ clarifications 33

34 Foreign Direct Investment (FDI) in India Reporting Requirements Inflow Report the details of amount of cons iderat ion to the Regional RBI office within 30 days of rece ipt in the Form ARF through an AD Category I bank with the following documents Foreign Inward Remittance Certificate (FIRC) evidencing receipt and KYC report of the non resident investor from overseas bank remitting the amount Report acknowledged by the regional Office which will allot lot a UIN for amount reported Issue of Shares File Form FC-GPR not later than 30 days from date of issue of shares Signed by MD, Director, Secretary of the company (CS) and submitted to AD of the bank along with following documents: Certificate from CS; Certificate from SEBI registered Merchant Banker or Chartered Accounts Transfer of Shares Submit Form FC-TRS to AD Category I bank within 60 days from date of rece ipt of am ount of consideration Onus of submission on transferor/ transferee resident in India; and on investee company in case Non Resident investor (including NRI) acquires stock on stock exchange Non- Cash Issue of shares against conversion of ECB Full conversion of ECB into equity- Form FC-GPR to RBI regional office and Form ECB-2 to Department of Statistics and Information Management (DSIM), RBI within 7 working days from close of corresponding month Partial conversion of ECB- Form FC-GPR to RBI regional office and Form ECB-2 with E CB partially converted to equity indicated on top of form. In subsequent months, the outstanding balance of ECB shall be reported in Form ECB-2 to DSIM FCCB/ DR issues Domestic custodian shall report issue/ transfer of sponsored/ unsponsored DR as per DR Scheme 2014 in Form DRR within 30 days of close of issue/ program

35 Foreign Direct Investment (FDI) in India Reporting Requirements 30 Days 180 Days 30 Days Funds Received from Foreign Entity Advance Remittance Form (ARF) Allocation of Shares Form FC-GPR Illustration: Documents for ARF Certificate from the bank evidencing the receipt of the remittance. KYC report on the non-resident investor from the overseas bank remittingthe amount Illustration: Documents for Form FC-GPR Unique Identification Number from RBI KYC report for the beneficiary CS certificate Certificate from SEBI registeredmerchant Banker / Chartered Accountant Disclaimer Certificate Statutory AuditorCertificate Board resolution LRN (Loan Registration Number) Copy of FIPB approval(if required) Details of Transfer of shares if any No objection certificate from the remitter etc. Entry of Foreign Investor in India 35

36 Issue and Transfer of Shares Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 (notification No. FEMA20/2000-RB dated May 3, 2000) Issue of Shares Capital instruments should be issued within 180 days from day of receipt of inward remittance; else refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to NRE/FCNR (B) account Issue price of shares Listed on recognized stock exchange in India- not less than price worked out in accordance with SEBI guidelines Not listed on any stock exchange in India- not less than fair valuation done by SEBI registered Merchant Banker or a Chartered Accountant as per any internationally accepted pricing methodology onanarm s length basis Preferential allotment- as perthe pricingguidelines laiddown by RBI

37 Issue and Transfer of Shares Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 (notification No. FEMA20/2000-RB dated May 3, 2000) Transfer of Shares General permission granted to non-residents/ NRIs for acquisition of shares by wayoftransfer s.t. conditions: 1) Government approval not required for transfer of shares in the investee company from one non-resident to another non-resident in sectors which are under automatic route. Government approval required for transfer of stake from one non-resident to another non-resident in sectors which are under Government approval route 2) NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to anothernri 3) A person resident outside India can transfer any security to a person resident in Indiaby wayof gift 4) A person resident outside India can sell shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a registeredstock broker or a registeredmerchant banker 5) A person resident in India can transfer by way of sale, shares/ convertible debentures (including transfer of subscriber s shares), of an Indian company under private arrangement to a person resident outside India, subject to the guidelines given in para 5.2 and Section 1 of Annexure 3 of Consolidated FDI Policy, effective from June

38 Issue and Transfer of Shares Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 (notification No. FEMA20/2000-RB dated May 3, 2000) Transfer of Shares General permission granted to non-residents/ NRIs for acquisition of shares by way of transfer s.t. conditions (Cont.): 6. General permission is also available for transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the guidelines given in para 5.2 and Section 1 ofannexure 3 of Consolidated FDI Policy, effective from June The above General Permission also covers transfer by a resident to a nonresident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company

39 Issue and Transfer of Shares Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 (notification No. FEMA20/2000-RB dated May 3, 2000) Transfer of Capital Instruments Prior approvalof RBI required in the following cases 1. Transfer of capital instruments from resident to non-residents by way of sale where: Transfer is ata price which falls outside the pricing guidelines specified by the Reserve Bank from time to time and the transaction does not fall under the exception given in para 5.2. of Annexure 3 of Consolidated FDI Policy, effectivefrom June Transfer of capital instruments by the non-resident acquirer involving deferment of payment of the amount of consideration. Further, in case approval isgranted for a transaction, the same should be reported in Form FC-TRS, to an AD Category-I bank for necessary due diligence, within 60 days from the date of receipt of the full and final amount of consideration 2. Transfer of any capital instrument, by way of gift by a person resident in India to a person resident outside India. While forwarding applications to Reserve Bank for approval for transfer of capital instrumentsby way of gift, the documents mentioned in Section 2 of Annexure 3 of Consolidated FDI Policy, effectivefrom June should be enclosed.

40 Issue and Transfer of Shares Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 (notification No. FEMA20/2000-RB dated May 3, 2000) Transfer of Capital Instruments Prior approvalof RBI not required in the following cases: - 1. Transfer of Shares from a Non-Resident to Resident under the FDI scheme where pricingguidelines under FEMA are not met,providedthat Original and resultant FDI is in compliance with the FDI policy and FEMA regulations Pricing for transaction iscompliantwith SEBI regulationsandguidelines Chartered Accountants Certificate that compliance with the relevant SEBI regulations/guidelinesas indicated above is attached to the Form FC-TRS to be filed with the ADbank 2. Transfer of shares from Resident to Non-Resident: Transfer of shares requires the prior approval of the Government conveyed through FIPB as per the Consolidated FDI Policy, effective from June and the approval has been obtained and transfer of shares adhered with the pricing guidelines and document requirements specified by RBI Transfer of shares attract SEBI (Substantial Acquisition of Shares and Takeovers) Regulations subject to the adherence with the pricing guidelines and documentationrequirementsasspecified byrbi Transfer of shares does notmeet the pricing guidelines under the FEMA, 1999 provided the resultant FDI is in compliance with the FDI policy and FEMA regulations; pricing for transaction is compliant with SEBI regulations and guidelines (Chartered Accountants Certificate that compliance with the relevant SEBI regulations/guidelines as indicated above is attached to the Form FC-TRS to be filed withthe ADbank)

41 Foreign Exchange Management Act Conversion of ECB/Lump sum fee/royalty etc. into Equity Conversion to Equity Indian companies have been granted general permission for conversion of External Commercial Borrowings (ECB) (excluding those deemed as ECB) in convertible foreign currency into equity shares/fully compulsorily and mandatorily convertible preference shares, subject to the following conditions and reporting requirements: The activity of the company is covered under the Automatic Route for FDI or the company has obtained Government approval for foreign equity in the company; The foreign equity after conversion of ECB into equity is within the sectoral cap, if any Pricing of shares is as per the provision of para 2 Annexure 3 of Consolidated FDI Policy Compliance with the requirements prescribed under any other statute and regulation in force; and The conversion facility is available for ECBs availed under the Automatic or Government Route and is applicable to ECBs, due for payment or not, as well as secured/unsecured loans availed from non-resident collaborators. General permission is also available for issue of shares/preference shares againstlump sum technical know-how fee, royalty due for payment, subject to entry route, sectoral cap and pricing guidelines (as per the provision of para 2 above)andcompliancewith applicable tax laws

42 Repatriation Dividend Freely repatriablewithoutany restrictions Net after tax deduction at source (TDS) or dividend distribution tax (DDT) as applicable Governed by Foreign Exchange Management (Current Account Transactions) Rules, 2000 Interest Interest on fully, mandatorily & compulsorily convertible debentures freely repatriablewithout anyrestrictions Net of applicable taxes Governed by Foreign Exchange Management (Current Account Transactions) Rules, 2000 Exceptions: Sectors such as Defense which are subject to a minimum lock in period; or where investments in specific non-repatriable schemes

43 Remittance Sale proceeds of shares & securities Remittance of asset (i.e. sale proceeds of share and securities and their remittance) is governed by the Foreign Exchange Management (Remittance of Assets) Regulations, 2000 under FEMA AD Category-1 can allow remittance of sale proceeds (net of applicable taxes) of a security to the seller of shares outside India provided Security has been held on repatriation basis Sale if security has been made in accordance with the prescribed guidelines NOC/ Tax clearance cert ificate from the Income Tax department has been produced Winding up/ liquidation of companies AD Category 1 banks allowed to remit winding up proceeds of companies in India which are under liquidation s.t. payment of applicable taxes an any order issued by the court winding up the company or official liquidator Applicant needs to submit the following to the AD Category 1 bank: NOC/ Tax clearancecertificatefrom the Income Tax department Auditor s certificate confirming that All liabilities in India have been either fully paid or adequately provided for Winding up is in accordance with the provisions of the Companies Act as applicable In case of winding up otherwise than by a court- No legal proceeding pending inany courtin India against the applicantor the company under liquidationand there is no legal impedimentin permitting the remittance

44 4 FAQs

45 FAQs Who all are the eligible entities that are permitted to invest in India? Are there any restrictions on investing in India from certain countries? Are domestic and foreign investors treated differently in India? Are foreigners allowed to invest in India? A number of entities are permitted to invest in India. The investing entity can be an individual, company, foreign institutional investor, foreign venture capital investor, foreign trust, private equity fund, pension/provident fund, sovereign wealth fund, partnership/proprietorship firm, financial institution, non-resident Indian/person of Indian origin, others, etc. The investments can be via the automatic approval or the Government approval route as per the specified policies. However, there are certain restrictions for Bangladesh and Pakistan. Yes. A citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government approval route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space and atomic energy and sectors/activities prohibited for foreign investment. No. Foreign investors are treated at par with domestic investors and they enjoy similar rights. However, foreign investors need to additionally follow Foreign Exchange Management Act (FEMA) guidelines. Investment by NRIs under FEMA (Transfer or Issue of Security by Persons Resident OutsideIndia) Regulations will be deemed to be domestic investment at par with the investment made by residents. A non-resident entity can invest in India, subject to the prevailing FDI Policy except in those sectors which are prohibited. However, a citizen or entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space and atomic energy and sectors/activities prohibited for foreign investment.

46 FAQs How can a foreign investor set up business in India? Can NRI/PIO invest in sole proprietorship / partnership firm in India? Can foreign investor invest in unlisted shares issued by a company in India? A foreign company can set up business in India via FDI either by incorporating an Indian company, under the Companies Act, 1956 (as a Joint Venture or a Wholly Owned Subsidiary) or as a Foreign Company (by setting up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company) which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, An Indian company may receive FDI under the two routes (i) Automatic Route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time or (ii) Government Route for FDI in activities that require prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance. NRI/PIO can invest in sole proprietorship (repatriable) / partnership firm (non-repatriable), except those in agricultural or plantation or real estate business, or in the printmedia sector, s.t. approval of RBI Yes. As per the regulations/guidelines issued by the Reserve Bank of India/Government of India, investment can be made in unlisted sharesof Indian companies.

47 FAQs Who is a Foreign Portfolio Investor(FPI)? Can anyone buy or sell securities as a FPI in India? Who is a Foreign Venture Capital Investor(FVCI)? What are Depository Receipts (DRs)? What are American Depository Receipts (ADRs)? What are Global Depository Receipts (GDRs)? FPIs refers to a class of investors who invest in financial securities of a country without direct ownership of the underlying company. These are considered liquid investments. Under the recent SEBI FPI Regulations, 2014, Foreign Institutional Investors (FIIs) or sub accounts and Qualified Foreign Investors (QFIs) have been merged into a single category, referred to as FPIs. No person can buy, sell or deal in securities as FPI unless he/she has obtained a certificate of registration from a Designated Depository Participant (on behalf of SEBI) post submission of an application in Form A along with the prescribed fees FVCI refers to an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI(FVCI) Regulations} and proposes to make investment in accordance with these Regulations. DRs refer to negotiable securities representing INR denominated equity shares (held as a deposit by custodian bank) of a company and issued outside of India by a Depository bank on behalf of the company The DRs listed and traded in US markets are known asamerican Depository Receipts (ADRs) The DRs listed and traded exceptin the US markets are known as the Global Depository receipts (GDRs)

48 FAQs Are investments in India repatriable? Foreign capital invested in India is generally allowed to be repatriated along with capital appreciation, if any, after payment of taxes due, provided the investment was made on a repatriation basis. Repatriation of Dividend Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions)Rules, 2000, as amended from time to time. Who is a Non Resident Indian (NRI)? Who is a person of Indian origin (PIO)? Repatriation of Interest Interest on fully, mandatorily & compulsorily convertible debentures is also freely repatriable without any restrictions (net of applicable taxes). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time. A Non-resident Indian (NRI) is a person resident outside India who is a citizen of India. A Person of IndianOrigin (PIO) is a person resident outsideindia who is a citizen ofany country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions: (i) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (ii) Who belonged to a territory that became part of India after the 15th day of August, 1947; or (iii) Who is a child ora grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or (iv) Who is a spouse of foreign originof a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c). PIO included Overseas Citizen of India(OCI)

49 FAQs Can NRIs invest in India? An NRI can invest in capital of Indian companies on non- repatriation basis provided: (i) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/Authorized banks (ii) entity is not engaged in agricultural/plantation or real estate business or print media sector (iii) amount invested not eligible for repatriation outside India. Forinvestments on repatriable basis, provisions of FDIpolicy apply. NRIs residents in Nepal and Bhutan are permitted to invest in the capital of Indian companies on repatriation basis, s.t. condition that the amount of consideration for such investment shall be paid only by way of inward remittance in free foreign exchange through normal banking channels. What are investment vehicles? Are foreign investments permitted in investment vehicles? Investment Vehicles refer to entity registered and regulated under relevant regulations framed by SEBI or any other authority designated for the purpose and include Real Estate Investment Trusts (REITs) governedby the SEBI (REITs) Regulations, 2014, Infrastructure Investment Trusts (InvIts) governedby the SEBI (InvIts) Regulations, 2014 andalternative InvestmentFunds (AIFs) governedby the SEBI (AIFs) Regulations, Yes. Foreign investments are permitted in investment vehicles under the automatic route. However, an entity registered / incorporated in and a citizen of Pakistan/ Bangladesh is not permitted

50 FAQs What is the institutional framework governing FDI in India? What is FIPB? FDI in India is regulated under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations,2000 (Original notification is available at ; Subsequent amendment notifications are available athttps://rbi.org.in/scripts/bs_femanotifications.aspx ) Besides Foreign Exchange Management Act, 1999, FDI is subject to other regulations as per Reserve Bank of India (RBI), Foreign InvestmentPromotion Board (FIPB) (DEA, Ministry of Finance) and Department of Industrial Policy and Promotion (Ministry of Commerce and Industry). The Foreign Investment Promotion Board (FIPB), housed in the Department of Economic Affairs, Ministry of Finance, is an inter-ministerial body, responsible for processing of FDI proposals and making recommendations for Government approval. The extantfdi Policy, Press Notes andother related notified guidelines formulated by Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce and Industry are the bases of the FIPB decisions. In the process of making recommendations, the FIPB provides significant inputs for FDI policy-making. What is Foreign Direct Investment (FDI)? FIPB comprises of (i) Secretary to Government, Department of Economic Affairs, Ministry of Finance- Chairperson; Secretary to Government, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry; Secretary to the Government, Department of Commerce, Ministry of Commerce and Industry; Secretary to Government, Economic Relations, Ministry of External Affairs Foreign Direct Investment (FDI) means investment by non-resident entity/person resident outside India in the capital of an Indian company and entails acquiring a lasting interest outside of the economy of the investor with an element of control (i.e. ownership of at least 10% shares) and includes capitalinvestments from abroad in the productive capacity of a Nation?

51 FAQs Can an investor invest in any sector as FDI? Which are the prohibited sectors in which FDI is not allowed? What are the levels of approval of FDI in India? There are different criteria, application procedures, remittance rules andreporting requirement for each form of investment. For details regarding the eligibility, permitted activities, sectoral caps, investment routes and regulatory requirements etc., one can access the latest Consolidated FDI Policy Circular dated June 07, 2016 which is available in the public domain and can be downloaded from the website of Ministry of Commerce and Industry,Department of Industrial Policy and Promotion A subsequent amendment to this circular dated 20 June, 2016 is available at: FDI is prohibited in: a) Lottery Business including Government/private lottery, online lotteries, etc. b) Gambling and Betting including casinos etc. c) Chit funds d) Nidhi company e) Trading in Transferable Development Rights (TDRs) f) Real Estate Business or Construction of Farm Houses Real estate business shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes h) Activities/sectors not open to private sector investment e.g.(i) Atomic Energy and (II) Railway operations(other than permitted activities mentioned in para 5.2 of the Consolidated FDI Policy 2016). Ministry of Finance approves cases for equity inflow of and below INR 5000 crore. For equity inflow of more than INR 5000 crore, the cases are considered by the Cabinet Committee on Economic Affairs (CCEA).

52 FAQs Who all can invest in FDI in India? Can citizens of Bangladesh invest via FDI in India? Can citizens of Pakistan invest via FDI in India? Who are the eligible investment entities which can attract FDI in India? Any Non resident Entity can invest subject to FDIpolicy (except in prohibited sectors) NRI resident in and Citizens of Nepal & Bhutan permitted to invest on repatriation basis (amount of consideration for such investment shall be paid only by way of inward remittances through normal banking channels) Erstwhile OCBs incorporated outside India can make fresh FDI investments as incorporated non-resident entities (prior approval of GoI if through Government route; RBI if through Automatic route) Company, trust or partnership firm incorporated outside India and owned and controlled by NRIs Foreign InstitutionalInvestors (FII) and Foreign Portfolio Investors (FPI) Registered FIIs/ FPIs/ NRIs as per Schedules 2, 2A and 3 respectively of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 can invest /trade through a registered broker of Indian Companies on recognized stock exchanges SEBI registered Foreign Venture Capital Investor(FVCI) Citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under Government route Citizen of Pakistan or entity incorporated in Pakistan can invest only under Government route in sector/ activities other then defense, space & atomic energyand prohibited sector/ activities The eligible instruments for FDI include: Indian Companies can issue capital against FDI NRI/PIO resident outside India can invest in Partnership Firm/ Proprietary Concern Non Residents (other than NRI/PIO) can invest in Partnership Firm/Proprietary Concern Trusts Limited Liability Partnerships (LLP) InvestmentVehicles

53 FAQs What are the eligible instruments for FDI in India? Are there any restrictions on the sectors for FDI in India? What are the routes for FDI investment in India? Which sectors is FDI permitted via the automatic route in India? In which sectors in India is FDI permitted 100% via automatic route? Investments can be made by non-residents in the equity shares/fully, compulsorily and mandatorily convertible debentures/fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. The company is also permitted to issue Foreign Currency Convertible Bonds (FCCBs) ; Depository Receipts(DRs); warrants and partly paid shares to a person resident outside India subject to terms andconditions as stipulatedby the RBI. Yes. Investments by non-residents can be permitted in the capital of a resident entity in certain sectors/activity with entry conditions. Such conditions may include norms for minimum capitalization, lock-in period, etc. as per the latest FDI policy. There are 2 routes for FDI in India. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government route, are considered by FIPB. FDI via automatic route is permitted in almost all sectors in India, for instance, in mining, plantation, railways infrastructure, pharmaceuticals, NDFCs, petroleum and natural gas, civil aviation etc. subject to certain conditions as specified in the FDI policy. However, these are subjectto certain conditions, such as sectoralcaps. The sectors which are 100% automatic include Agriculture & Animal Husbandry, Plantation, Mining, Petroleum and Natural Gas, Broadcasting Carriage Services, Civil Aviation - Greenfields/ Brownfields, Air Transport Services (Non Scheduled Air Transport Service/ Helicopters services/ seaplane services requiring DGCA approval); Other Services under Civil Aviation Sector; Construction Development: Townships, Housing, Built-up Infrastructure; Industrial Parks; Trading; E-Commerce Activities; Duty FreeShops; Railway Infrastructure; Asset Reconstruction Companies; Credit Information Companies; White Label ATM Operations; Non-Banking Financial companies; Pharmaceuticals Greenfields. These are further s.t. conditions as stipulated in the latest FDI policy circular.

54 FAQs What are the reporting requirements for FDI in India? What if the there is a delay in issue of capital instruments? The amount soreceived must be reported in Advance Remittance Form (ARF) within 30 days of such receipt. The capital instruments should be issued within 180 days from the date of receipt of the inward remittance received through normal banking channels including escrow account opened and maintained for the purpose or by debit to the NRE/FCNR (B) account of the nonresident investor. The details of issue of capital instruments must be reported within 30 days of such issue in Form FC-GPR. In case the capital instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account,as the case maybe.

55 FAQs In which sectors is FDI permitted under the Government route? Which are the sectors where 100% FDI is permitted via the Government approval route? What are the modes of payment allowed for receiving Foreign Direct Investmentin an Indian company? FDI partly or fully under Government route is permitted under various sectors including Trading of Food products manufactured or produced in India; Broadcasting Content Services; Print Media- Newspapers, Periodicals etc.; Print Media- Scientific Magazines, Specialty Journals etc.; Satellites Establishment and Operations; Multi Brand Retail Trading; Banking - Public Sector; Defence; Air Transport Services- Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline; Regional Air Transport Service; Private Security Agencies; Telecom Services; Single Brand Product Retail Trading and Banking - Private Sector. These are further s.t. conditions as stipulated in the latest FDI policy circular. 100% FDI via Government approval route only is permitted in Trading of Food products manufactured or produced in India; Print Media- including Scientific Magazines, Specialty Journals etc.; Satellites EstablishmentandOperations s.t. conditions as stipulated in the latest FDI policy circular. Indian company issuing shares /convertible debentures under FDI Scheme to a person resident outside India shall receive the amount of consideration required to be paid for such shares /convertible debentures by: (i) inward remittance through normal banking channels. (ii) debit to NRE / FCNR account of a person concerned maintained with an AD category I bank. (iii) conversion of royalty / lump sum / technical know how fee due for payment or conversion of ECB, shall be treated as consideration for issue of shares. (iv) conversion of import payables / pre incorporation expenses / share swap can be treated as consideration for issue of shares with the approval of FIPB. (v) debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration.

56 FAQs What are the guidelines for the issue price of shares against FDI received for a company listed in India? What are the guidelines for the issue price of shares against FDI received for an unlisted company in India? Is transfer of shares to non-residents/ NRIs permitted as per the FDI policy? In case the company is listed on recognized stock exchange in India,the issue price must not be not less than price worked out in accordance with SEBI guidelines. In case the company is not listed on any stock exchange in India,the price of the share must not be less than fair valuation done by a SEBI registered Merchant Banker or a Chartered Accountant as per any internationally accepted pricing methodologyon an arm s length basis General permission is granted to non-residents/ NRIs for acquisition of shares by way of transfer s.t. conditions such as following: 1) Government approval is not required for transfer of shares in the investee company from one non-resident to another non-resident in sectors which are under automatic route. Government approval is required for transfer of stake from one non-resident to another non-resident in sectors which are under Government approval route 2) NRIs may transfer by way of sale or gift shares or convertible debentures to another NRI 3) Person resident outside India can transfer any security to a person resident in India by way of gift 4) A person resident outside India can sell shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a registered stock broker or a registered merchantbanker 5) A person resident in India can transfer by way of sale, shares/ convertible debentures (including transfer of subscriber s shares), of an Indian company under private arrangement to a person resident outside India,subject to the FDIPolicy guidelines 6. General permission is also available for transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India,subject to the FDI guidelines 7. The above General Permission also covers transfer by a resident to a non-resident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company

57 FAQs Is transfer of capital instruments from resident to nonresidents permitted? Which cases of transfer of capital instruments from resident to nonresidents require RBI approval Can ECBs be converted into Equity? Yes. Transferof capital instruments from resident to non-residents is permitted. However, there are certain cases that require prior RBI approval. 1. Transfer is at a price which falls outside the pricing guidelines specified by the Reserve Bank from time to time and the transaction does not fall under the exception given in para 5.2. of Annexure 3 of Consolidated FDI Policy, effectivefrom June Transferof capital instruments by the non-resident acquirerinvolving deferment of payment of the amount of consideration. Further, in case approval is granted for a transaction, the same should be reported in Form FC-TRS, to an AD Category-I bank for necessary due diligence, within 60 days from the date of receipt of the full and final amount of consideration 2. Transfer of any capital instrument, by way of gift by a person resident in India to a person resident outside India. While forwarding applications to Reserve Bank for approval for transfer of capital instruments by way of gift, the documents mentioned in Section 2 of Annexure 3 of Consolidated FDI Policy, effective from June should be enclosed. require prior RBI approval. Yes. Indian companies have been granted general permission for conversion of External Commercial Borrowings (ECB) (excluding those deemed as ECB) in convertible foreign currency into equity shares/fully compulsorily and mandatorily convertible preference shares, subject to conditions and reporting requirements as per the latest FDI policy.

58 THANK YOU 58