Following the liberalisation of foreign investment in the defence sector, the Department of Industrial Policy & Promotion, Government of India has issued Press Note No. 8 (2014 Series) that now permits foreign investment in the railway sector. The permitted scope of business in the sector is as follows: Construction, operation and maintenance of the following: (i) Suburban corridor projects...
Liberalisation of Foreign Investment in Defence
A few weeks ago, the Cabinet had announced the liberalisation of the foreign investment policy in the defence sector. Now, the Department of Industrial Policy and Promotion has issued the Press Note No. 7 (2014 Series) that implements the new policy. Some of the principal changes include the following: (i) Increase in the sectoral cap: The maximum...
Guest Post: Optionality Clauses Permissible in FDI Instruments – the Heydays for Exit Rights
[This post is contributed by Nidhi Bothra of Vinod Kothari & Co. She can be contacted at [email protected]. This is a continuation of a previous post on this topic, and supplements the analysis in that post.] The optionality clause in equity shares/ compulsory convertible debentures/ preference shares has been a gray area from the regulatory perspective in India for years. These...
FDI in Pharma; Non-Compete
According to the prevailing annual FDI policy notified by the Government in April 2013, foreign direct investment (FDI) in the pharmaceuticals sector is allowed up to 100%. While FDI is allowed in greenfield projects under the automatic route, FDI in brownfield projects requires prior Government permission. Given the numerous acquisitions of Indian pharma players by multinational companies in...
FDI and Acquisition of Shares on the Stock Exchange
Under the prevailing regime on foreign direct investment (FDI) in India, only certain types of investors are entitled to buy and sell shares on the stock exchange through a registered broker. They are foreign institutional investors (FIIs), qualified foreign investors (QFIs) and non-resident Indians (NRIs). All other types of non-resident investors may either buy shares from the company in a new...
FDI and the “Control” Question
Eons ago, an English judge remarked that “public policy” is an unruly horse and once you get astride it you will never know where it will carry you. Lately, corporate India has been left to contend with another unruly horse in the form of the concept of “control”, whose scope and meaning have been stretched in different directions without the requisite precision, often altering according to time...
Approval of New FDI Norms; Impact on Multi-brand Retail
In an earlier post, we had discussed the relaxation measures approved by the Union Cabinet for increase in the foreign direct investment (FDI) in certain sectors. Now, the specific changes to the FDI Policy Circular of 2013 have issued. The changes to the FDI caps and routes are available on the website of the Press Information Bureau (PIB) (under releases issued on August 1, 2013). Separately...
Another Round of FDI Reforms
The Government seems to be facing a somewhat similar situation that it faced way back in 1991 when it launched big bang reforms for liberalization of the Indian economy. With slowing growth rates and a sliding Rupee, the Government seems compelled to take immediate measures. One such set of measures relates to reforms that help attract greater flow of foreign direct investment (FDI) into the...
Committee Report on Foreign Portfolio Investments
In mid-June, SEBI had announced the submission of a report by the Committee on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments under the chairmanship of Mr. K.M. Chandrasekhar. The full report in now available online. The key recommendations of the committee are to combine the erstwhile portfolio investment categories of foreign institutional investors (FIIs)...
Changes in the Revised FDI Policy of 2013
[In a previous post, we had drawn attention to the Revised FDI Policy. One of the criticisms of the policy review process was that the changes were not evident from the face of the policy, thereby making it less user-friendly. Fortunately, this gap has been filled in a timely manner by one of our guest contributors below. The following post is contributed by Parag Bhide, who is a Senior Associate...
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