The Ministry of Finance recently published on its website a report of the Working Group on Foreign Investment in India. The report seeks to address the complexity and overlaps in the existing regime on foreign investment in India and to propose a more streamlined framework. It focuses largely on foreign portfolio investment and less on foreign direct investment, although some of the...
Depository Receipts and Voting Rights
SEBI has written to the Ministry of Finance and the Reserve Bank of India to curb the practice whereby holders of ADRs/GDRs pass on their voting rights to boards or managements of the companies in which they hold these instruments. As the Economic Times reports: The Securities & Exchange Board of India (Sebi) has recommended a change in current rules to allow holders of American Depository...
The Impact of Tightening Financial Regulation
The last week has witnessed tighter financial regulations emerging out of the U.S. and European markets. While some of the reforms are expected to result in migration of investments into more liberal markets in Asia (including India), others represent introduction of stringent measures that are already in place in India. Possible Regulatory Arbitrage First, the European Union finance ministers...
Consolidated FDI Regime Operational
As we had discussed in December 2009, the Government had proposed a draft master press note to consolidate the regime relating to foreign direct investment (FDI). The consolidation exercise has now fructified with the issue of the Consolidated FDI Policy (Circular 1 of 2010), which takes effect from April 1, 2010. The policy document itself contains evidence of the complexity that has afflicted...
FIPB Website
I chanced upon a website dedicated solely to the Foreign Investment Promotion Board (FIPB). It is not clear as to how long this website has been in existence. Today’s Business Standard reports that the FIPB will soon commence receiving electronic applications, and that the e-filing facility will be formally launched tomorrow (March 12). This is a welcome development and will certainly go a long...
Pricing Adjustments for FCCBs
On November 27, 2008, the Ministry of Finance introduced changes to the pricing norms for FCCBs. As we had discussed then, two changes were proposed: (i) the minimum price will be the average weekly high and low prices for the 2 weeks prior to the relevant date, instead of the previous price determined as the higher of the average for 6 months and 2 weeks; (ii) the relevant date for price...
Easing the FDI Approval Process
The Government has introduced a recent change to the approval process for FDI that may ease the process, at least for some large transactions. The threshold for obtaining the approval of the Cabinet Committee on Economic Affairs has been increased from Rs. 600 crore (Rs. 6 billion) to Rs. 1200 crore (Rs. 12 billion). The press release sums up the change: Presently, the recommendations of the...
Foreign Collaboration and Royalty Payments
Hitherto, Indian companies were allowed to make royalty payments to their foreign collaborators under the automatic route within certain limits. These involved payment for technology transfers of a lump sum fee of US$ 2 million and royalty of 5% on domestic sales and 2% for exports. Where no technology transfer was involved, royalty of up to 1% for domestic sales and 2% for exports was allowed...
Lock-in for Real Estate FDI Clarified
According to Press Note 2 of 2005 issued by the Department of Industrial Policy and Promotion, there are certain conditions for foreign investment in the real estate sector. The relevant conditions are as follows: i. Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six...
India and China: Foreign Investment and Venture Capital
RBI/2008-09/ RBI/2008-09/ The Asian Journal of Comparative Law has just published an interesting article that compares foreign direct investment (FDI) and venture capital investment in the two Asian economic giants. In Unraveling the Puzzle of Differing Rates of FDI and FVCI in India and China the authors Haitian Lu, Hong Huang and Swati Deva find that when it comes to FDI, China scores better...
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