Scribd Logo
Upload

Welcome to Scribd!

  • 25 views

    Sources of Foreign Financing or Foreign Currency Finance For Indian Companies

    Uploaded by

    arshad391
    Indian companies have several options for obtaining foreign financing. They can receive capital from foreign collaborators by issuing shares or through technical assistance. International financial institutions like the World Bank and IFC provide long-term financing. Non-resident Indians are also permitted to purchase shares and debentures of Indian companies. Automatic route FDI allows up to 100% foreign investment in most sectors, while sectors requiring government approval are considered by FIPB. Indian companies can also raise capital abroad through issuing ADRs/GDRs or foreign currency convertible bonds if they meet eligibility criteria. Preference shares from foreign investors are treated as foreign direct investment.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd

    Sources of Foreign Financing or Foreign Currency Finance For Indian Companies

    Uploaded by

    arshad391
    25 views3 pages
    Indian companies have several options for obtaining foreign financing. They can receive capital from foreign collaborators by issuing shares or through technical assistance. International financial institutions like the World Bank and IFC provide long-term financing. Non-resident Indians are also permitted to purchase shares and debentures of Indian companies. Automatic route FDI allows up to 100% foreign investment in most sectors, while sectors requiring government approval are considered by FIPB. Indian companies can also raise capital abroad through issuing ADRs/GDRs or foreign currency convertible bonds if they meet eligibility criteria. Preference shares from foreign investors are treated as foreign direct investment.

    Original Title

    A Fm

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    DOC, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Indian companies have several options for obtaining foreign financing. They can receive capital from foreign collaborators by issuing shares or through technical assistance. International financial institutions like the World Bank and IFC provide long-term financing. Non-resident Indians are also permitted to purchase shares and debentures of Indian companies. Automatic route FDI allows up to 100% foreign investment in most sectors, while sectors requiring government approval are considered by FIPB. Indian companies can also raise capital abroad through issuing ADRs/GDRs or foreign currency convertible bonds if they meet eligibility criteria. Preference shares from foreign investors are treated as foreign direct investment.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    25 views3 pages

    Sources of Foreign Financing or Foreign Currency Finance For Indian Companies

    Uploaded by

    arshad391
    Indian companies have several options for obtaining foreign financing. They can receive capital from foreign collaborators by issuing shares or through technical assistance. International financial institutions like the World Bank and IFC provide long-term financing. Non-resident Indians are also permitted to purchase shares and debentures of Indian companies. Automatic route FDI allows up to 100% foreign investment in most sectors, while sectors requiring government approval are considered by FIPB. Indian companies can also raise capital abroad through issuing ADRs/GDRs or foreign currency convertible bonds if they meet eligibility criteria. Preference shares from foreign investors are treated as foreign direct investment.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 3

    Sources of foreign financing or foreign currency finance for Indian

    companies
    Funds can be collected from foreign sources, which usually consists of:-

    • Foreign Collaborators:- If approved by the Government of India, the Indian


    companies may secure capital from abroad through the subscription of foreign
    collaborator to their share capital or by way of supply of technical knowledge,
    patents, drawings and designs of plants or supply of machinery.
    • International Financial Institutions:- like World Bank and International Finance
    Corporation (IFC) provide long-term funds for the industrial development all over the
    world. The World Bank grants loans only to the Governments of member countries or
    private enterprises with guarantee of the concerned Government. IFC was set up to
    assist the private undertakings without the guarantee of the member countries. It also
    provides them risk capital.
    • Non-Resident Indians:- persons of Indian origin and nationality living abroad are
    also permitted to subscribe to the shares and debentures issued by the companies in
    India.

    Regulations pertaining to issue of shares by Indian companies to foreign


    collaborators/investors

    Automatic Route

    FDI up to 100% is allowed under the automatic route in all activities/sectors except the
    following which require prior approval of the Government:

    i) where provisions of Press Note 1 (2005 Series) issued by the Government of India are
    attracted.

    ii) where more than 24% foreign equity is proposed to be inducted for manufacture of items
    reserved for the Small Scale sector.

    iii) FDI in sectors/activities to the extent permitted under Automatic Route does not require
    any prior approval either by the Government or the Reserve Bank of India.

    iv) The investors are only required to notify the Regional Office concerned of the Reserve
    Bank of India within 30 days of receipt of inward remittances and file the required documents
    along with form FC-GPR with that Office within 30 days of issue of shares to the non-
    resident investors.

    Government Route

    FDI in activities not covered under the automatic route requires prior Government approval
    and are considered by the Foreign Investment Promotion Board (FIPB), Ministry of Finance.
    General permission of RBI under FEMA

    Indian companies having foreign investment approval through FIPB route do not require any
    further clearance from the Reserve Bank of India for receiving inward remittance and issue of
    shares to the non-resident investors. The companies are required to notify the concerned
    Regional Office of the Reserve Bank of India of receipt of inward remittances within 30 days
    of such receipt and submit form FC-GPR within 30 days of issue of shares to the non-resident
    investors.

    Regulations pertaining to issue of ADRs/GDRs by Indian companies?

    Indian companies are allowed to raise capital in the international market through the issue of
    ADRs/GDRs. They can issue ADRs/GDRs without obtaining prior approval from RBI if it is
    eligible to issue ADRs/GDRs in terms of the Scheme for Issue of Foreign Currency
    Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme,
    1993 and subsequent guidelines issued by Ministry of Finance, Government of India.

    After the issue of ADRs/GDRs, the company has to file a return in the proforma given in
    Annexure ‘C' to the RBI Notification No.FEMA.20/ 2000-RB dated May 3, 2000. The
    company is also required to file a quarterly return in a form specified in Annexure ’D' of the
    same regulations.

    There are no end-use restrictions on GDR/ADR issue proceeds, except for an express ban on
    investment in real estate and stock markets.

    How Indian companies issue Foreign Currency Convertible Bonds (FCCBs):

    FCCBs can be issued by Indian companies in the overseas market in accordance with Scheme
    for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository
    Receipt Mechanism) Scheme, 1993.
    The FCCB issue needs to conform to External Commercial Borrowing guidelines, issued by
    RBI vide Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to
    time.

    The regulations applicable in case of preference share investments:

    Foreign investment through preference shares is treated as foreign direct investment. Foreign
    investment in preference share is considered as part of share capital and fall outside the
    External Commercial Borrowing (ECB) guidelines/cap.
    Preference shares to be treated as foreign direct equity for purpose of sectoral caps on foreign
    equity, where such caps are prescribed, provided they carry a conversion option. If the
    preference shares are structured without such conversion option, they would fall outside the
    foreign direct equity cap.
    Shares issued against Lumpsum Fee, Royalty and ECB:

    Issue of equity shares against lump sum fee, royalty and external commercial borrowings
    (ECBs) in convertible foreign currency are permitted, subject to meeting all applicable tax
    liabilities and sector specific guidelines.

    Foreigner set up a partnership/proprietorship concern in India:

    Only NRIs/PIOs are allowed to set up partnership/proprietorship concerns in India. Even for
    NRIs/PIOs investment is allowed only on non-repatriation basis.

    Regulations for Foreign Venture Capital Investment

    A SEBI registered Foreign Venture Capital Investor with general permission from the
    Reserve Bank of India can invest in a Venture Capital Fund or an Indian Venture Capital
    Undertaking, in the manner and subject to the terms and conditions specified in Schedule 6 of
    RBI Notification No. FEMA 20/2000-RB dated May 3, 2000 as amended from time to time.

    You might also like