2024-05-18 03:43:22
Overseas Direct Investment – Finegral Consulting

Overseas Direct Investment

//Overseas Direct Investment

Introduction:

An Indian Company has been permitted make investment in overseas Joint Ventures (JV)/ Wholly Owned Subsidiaries (WOS) under approval or automatic route as may be applicable.

Investment limit under Automatic route:

The total financial contribution of an Indian Party shall not exceed 400% of the net worth as per the last audited balance sheet however the total financial contribution in any financial year shall not exceed USD 1 billion.

If the total financial contribution exceeds the above threshold limit prior approval of RBI will have to be obtained.

The total financial commitment of the Indian Party in all the Joint Ventures / Wholly Owned Subsidiaries shall comprise of the following:

  1. 100% of the amount of equity shares and/ or Compulsorily Convertible Preference Shares (CCPS);
  2. 100% of the amount of other preference shares;
  3. 100% of the amount of loan;
  4. 100% of the amount of guarantee (other than performance guarantee) issued by the Indian Party;
  5. 100% of the amount of bank guarantee issued by a resident bank on behalf of JV or WOS of the Indian Party provided the bank guarantee is backed by a counter guarantee / collateral by the Indian Party.
  6. 50% of the amount of performance guarantee issued by the Indian Party provided that if the outflow on account of invocation of performance guarantee results in the breach of the limit of the financial commitment in force, prior permission of the Reserve Bank is to be obtained before executing remittance beyond the limit prescribed for the financial commitment.

However an Indian Company may extend guarantee / loan to oversee JV/WOS only in which it has equity participation, and without equity contribution prior approval of RBI will be required.

 Acquisition of existing foreign Company:

Indian company can purchase the shares of existing company and a valuation report of such shares will have to be obtained from a Chartered Accountant.

Procedures:

The remittance is to be remitted through AD-1 Category banker and form ODI-I is to be filed for processing such remittance along with the documents as may be required which differs from banks to banks.

At the time of furnishing guarantee form ODI-II is to be reported to RBI through AD-I category banker

Annual Performance Report (APR) in form ODI-III is to be submitted by June 30 every year.

Disclaimer: The contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Users of the Information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not a professional advice. We assume no responsibility for any consequences of use of such information