How can Foreign Investors Invest in Indian Company

Posted on: 2018-01-03 23:39:25

You might be a non resident Indian (NRI) or a foreigner who is looking to make a play for the market in India for some reason or the other. Quite often, as a foreign investor you may also be eager to know about the various ways in which you are able to use the money that you have in India and just grow it. You would be happy to know that there are several ways in which you would be able to invest in India even if you are not an Indian national.

Here you can follow some investment plans that are providing services to non-resident Indian (NRI) for investing in Indian company and abroad.

Foreign direct investment

Foreign direct investment (FDI) is the easiest way for one to invest in India in case that entity is not Indian. There are however certain activities and sectors where you will not be allowed to do this as such. Investments such as these are normally done under the aegis of the Foreign Exchange Management Act (FEMA). India has an FDI policy as well, which places caps on certain sectors. There are two major ways through which this can happen – the automatic route and the government route. There are certain sectors and activities that are covered specifically by the two routes.  Ones that cannot be done through the automatic route can be done via the government route.

The investment options open to you through the automatic route are normally strategic investments that have to be done over the longer term. In case of the government route the main authorities are the Foreign Investment Promotion Board (FPIB).

Foreign portfolio investment

You can invest in India as a foreigner through the various portfolio investment schemes (PIS). However, for that you need to be eligible – the only kinds of entities that are allowed to perform investments such as these are foreign institutional investors (FIIs), persons of Indian origin (PIO), NRIs, and qualified foreign investors (QFIs). They can invest in the convertible debentures and shares of Indian companies, the stock exchanges of India, and units of various mutual funds operating within India. An FII is basically an institution that has been incorporated outside India.

Foreign venture capital investors

A foreign venture capital investor (FVCI) is an entity who is established or has been incorporated outside the country. They are allowed to invest in domestic venture capital (VC) funds as well as VC undertakings. The latter are basically unlisted companies operating within India. In case you want to work as an FVCI in India you would have to procure separate registration from SEBI (Securities and Exchange Board of India). You would also need to invest at the very least 66.67 per cent of your investible funds in equity linked instruments and unlisted equity shares.

Other kinds of investments

NRIs can invest in various government securities in India – the same facility is afforded to the FIIs as well. Apart from this they can invest in any or all of the following options by companies in India:

  • Treasury bills
  • Commercial papers that have been issued by companies based in India
  • Listed non convertible debentures
  • Units of mutual funds based in India
  • Bonds

There are however a few restrictions that are applied in these cases by the RBI.

Non repatriable investments

These options are meant only for PIOs and NRIs. In this case they can buy shares in Indian rupees – the investment can be done through an NRO (nonresident ordinary). In case you invest in these non repatriable investment options your earnings would be sent to the NRO account that you have opened for this purpose. By definition, the amount that you have invested in this scheme and the capital profits that you have made from the same cannot be sent outside India.