7. Foreign direct investment is that investment, which is made to serve the
business interests of the investor in a company, which is in a different
nation distinct from the investor's country of origin.
The parent enterprise through its foreign direct investment effort seeks
to exercise substantial “Control” over the foreign affiliate company.
Exp. - An American company taking a majority stake in a company in
India.
8. 1) By Direction
Inward
Outward
2) By Target
Mergers and Acquisitions
Horizontal FDI
Vertical FDI
3 )By Motive
Resource-Seeking
Market-Seeking
Efficiency-Seeking
9. Available Financial Instruments
Equity Shares, Compulsorily Convertible Preference
Shares and compulsorily Convertible Debentures.
Not Available to Investors who are
Citizens of Pakistan OR Entities of Pakistan
Available with approval of FIPB (AP (DIR) No.22
dt.19/12/2007)
To Citizens & Entities of Bangladesh
10. Financial incentives (Funds from local Government)
Fiscal incentives (Exemption from import duties)
Indirect incentives (Provides land and other resources)
Political stability
Market potential & accessibility
Large economy
Market size
12. Rank Country Total 2000 to % of
2009 Total of all
Countries
1. Mauritius 39,379 44
2. Singapore 8,071 9
3. U.S.A 6,508 7
4. U.K 5,289 6
5. Netherlands 3,701 4
5. Cyprus 2,579 3
6. Germany 2,379 3
7. France 1,233 1
13. CONTRIBUTION IN FDI (in %)
MAURITIUS SINGAPORE U.S.A.
U.K. JAPAN NETHERLANDS
CYPRUS OTHERS
22%
44%
4%
4% 4%
5%
8% 9%
14. Investing in India – Entry Routes
Investing in India
Prior Permission
Automatic Route
(FIPB)
General rule By exception
No prior permission Prior Government
required Approval needed
Only information to the
Reserve Bank of India Decision generally
within 15 days of inflow/ Within 4-6 weeks
Issue of shares
15. Sector/Activity FDI Cap/Equity Entry Route
Airports 100% Automatic
Construction
100% Automatic
Development
Petroleum & Natural
Gas
26% (For PSUs) FIPB
(b) Refining 100% ( Private Automatic
companies)
Other than Refining 100% Automatic
Telecommunication
Basic and 74% Automatic up to 49%
cellular;STD/ISD
Manufacture of telecom
100% Automatic
equipment
Power ( Except Atomic
energy); regulations
transmission,
distribution and Power
17. Economic growth
Trade
Employment and skill levels
Technology diffusion and knowledge transfer
Linkages and spillover to domestic firms
Improved technology.
Management expertise.
Access to international markets
18. Gambling and betting
Lottery Business
Atomic Energy
Retail Trading
Agricultural or plantation activities of
Agriculture
(excluding Floriculture, Horticulture, Development of Seeds, Animal
Husbandry, Pisiculture and Cultivation of Vegetables, Mushrooms
etc., under controlled conditions and services related to agro and
allied sectors) and Plantations other than Tea Plantations)
19. An investor or investment fund that is from or
registered in a country outside of the one in which it is
currently investing.
Institutional investors include
hedge funds,
insurance companies,
pension funds and mutual funds.
21. Applicant’s track record, professional competence, financial
soundness, experience,
general reputation of fairness and integrity. (The applicant
should have been in existence for at least one year)
whether the applicant is registered with and
regulated by an appropriate Foreign Regulatory
Authority in the same capacity in which the application is
filed with SEBI
Whether the applicant is a fit & proper person.
22.
23. Chart Title
100000
80000
60000
40000
Axis Title
YEAR
20000
FII in Rs Cr.
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
-20000
-40000
-60000
25. Foreign Institutional Investor
• Foreign Institutional Investors can individually
purchase up to 10% and collectively up to 24% of
the paid up share capital of any company.
• This limit of 24% can be increased to sectoral cap/
statutory limit applicable to the Indian company by
passing Board or shareholder resolution.
• FIIs can purchase shares through open offer/ private
placement/ stock exchange.
• shares purchased by FII through stock exchange
can’t be sold through a private arrangement.
26. Unavailability of Corporate Problem of inflation
Debt Reduces flexibility of Policy
makers
Increase Forex Reserve
Hot Money
Increase Domestic Savings
False representation of
and Investments
Economy
Large Availability of Capital Can’t be used for long term
Advantages Disadvantages
Problems for small investors
27. FDI is when a foreign FII is when a foreign
company brings capital into a company buys equity in any
company or economy to set up company through stock
a production or some other market.
facility.
FDI gives some CONTROL in FII does not give any
operation of foreign company control in operation of
FDI FII
to the foreign company foreign company
28. FDI involves in direct FII is mostly the short term
production activity and is investment mostly in
long term in nature. financial market.
It enables a degree of It does not involve in degree
control in the company. of control in the company.
FDI brings long term FII brings short term
capital. capital.
FDI FII