This document discusses foreign investment in India, including different types like foreign direct investment (FDI), foreign institutional investors (FII), and foreign venture capital investors (FCVI). It provides background on India's economy and reforms welcoming foreign capital. FDI brings new technologies and skills while FIIs invest large amounts in securities and properties. FCVIs help promote innovation by providing needed capital. The document outlines policies, regulations and benefits to attract each type of foreign investor. It explains how FCVIs can set up funds to invest in Indian venture capital undertakings and notes India's advantages for foreign investors like its large market, skilled workforce and democratic environment.

1. Group: Rakesh Ramchandran, Ravi Iyer and Vivek
Chaudhari
Batch: X-MBA 23
INDIA And Foreign Investor

2. Brief Background
 Planned Economy / License Raj from 1947 –
1990
 Planning Commission administers the economy
 Balance of payment crises in 1980’s
 IMF bail out, Gold transferred to London as
bailout
 Economic reforms introduced in 1991

3. Foreign Investors
Foreign
Investors
Foreign Direct
Investment
(FDI)
Foreign
Institutional
Investors (FII)
Foreign
Venture Capital
Investor (FCVI)

4. Foreign Direct Investment
Plays an extraordinary and growing role in global
business.
Provide a source of new technologies, skills and
capital
Provide a strong impetus to economic
development.

5. Definition
Is defined as a company from one country
making a physical investment into building a
factory in another country.

6. How Has FDI Changed in the Past
Decade
In developing countries, the FDI inflow has been
increased from average of < $ 10 bio in 1970s to
< $20 bio in 1980s to explode in 1990s from $
26.7 billion to $179 billion in 1998 & $208 bio in
1999 and to $1604 in year 2011

7. Advantage of FDI
 Is necessary for creation of jobs,
 Is expansion of existing manufacturing industries.
 Play vital role in the healthcare, education, R&D,
infrastructure, retailing and in long-term financial
projects.

8. Policy makers
 Policy makers should design policies where foreign
investment can be utilized
 as means of enhancing domestic production, savings,
and exports;
 as medium of technological learning and technology
diffusion
 and also in providing access to the external market.
 Most importantly the policy makers should ensure
optimum utilisation of funds and timely
implementation of projects.

9. Awakening India
 Indian government while pursuing prudent policies
must also exercise strict control over inefficient
bureaucracy, red - tapism, and the rampant
corruption, so that investor’s confidence can be
maintained for attracting more FDI inflows to India.
 India needs a business environment which is
conducive to the needs of business.
 India require to have efficient and transparent official
procedures, rules and regulations, clearance, and
opportunities in India.

10. Awakening India
 this can be achieved only if India implements its
second generation reforms in totality and in right
direction.
 But if Indian government improves from past
mistakes during implementation of 3rd generation
economic reforms, then no doubt India will be
favourable FDI destination in the world.
 This change will show rest of the world, we can
achieve what is predicted by Goldman Sachs
that from 2007 to 2020, India’s GDP per capita in
US$ terms will quadruple and the Indian economy
will overtake France and Italy by 2020, Germany,
UK and Russia by 2025,Japan by 2035 and US
by 2043.

11. FII & FDI
 FDI Allowed through FII
 Private Equity, Preferential Allotment, Joint
Ventures, Capital Market Operations
 FII Allowed - Insurance and Banking
 100% FDI Allowed - Infra – Bridges & Tunnels
 FDI NOT Allowed – Arms, Railways, Coal,
Nuclear, Mining.

12. Foreign Institutional Investors
 Pool large amounts and invest in securities,
property, etc
 Banks, Insurance companies, Retirement or
Pension Funds, Hedge Funds, Investment
Advisors and Mutual Funds
 FII activity has been on a constant rise
 Focus on BRIC countries (Brazil, Russia, India
and China)

13. FII Figures
 In 2010, net foreign inflows was US$30 billion
 FY 2000 – 2011 - FDI inflow - US$ 197,935
million Yearly Increase - 43%
 January – July 2011, US$3.82 billion - Investment
in Shares and Bonds
 US$5.84 billion - Investment in Equities and Debt
securities
 As of July 2011, Total registered FIIs -1730

14. FII in India
 Largest pool of Highly Educated People
 Lack of Infrastructure – Slow Development
 Bureaucratic Hurdles – Red Tape
 When Markets slide – FII withdraw – Market
affected further

15. Foreign Venture Capital Investor
(FVCI)
 Investor incorporated established outside India
 Invest in venture capital funds (IVCF) or venture
capital undertakings (IVCU)
 Registered under SEBI FVCI regulation
 It’s a categorized under Private Equity

16. Indian venture capital fund (IVCF)
 A fund established in the form of a trust or a
company
 Registered with SEBI under SEBI regulation act
for VCF
 Had dedicated pool of capital raised in manner
specified in regulations and which invests in VCU

17. Indian venture capital undertaking
(IVCU)
 Has set up in India [India incorporated]
 Shares are not listed on a recognized stock
exchange in India
 Which is not engaged in an activity specified under
the negative list specified by the SEBI
 A new born private company which is yet to establish
itself and is in need of funds and experienced advice
and support

18. Why does INDIA Need FCVI
 Promote innovation and new enterprises
 Potential to grow in IT, bio technology,
pharmaceuticals, etc.
 Need for Capital Investment
 Conventional lenders choose to invest in Low risk
business and are also short on reserves

19. Policy
 Can contribute up to 100% of the capital of an
Indian Venture Capital Undertaking
 Can set up a domestic asset management
company to manage the fund.
 Investments can be made under automatic route
as per FEMA regulation act
 SEBI registered FVCI can also invest in domestic
venture capital fund registered under the SEBI
Regulations

20. Regulatory framework
 A SEBI registered FCVI having approval from RBI
under FEMA regulation can invest in IVCU or in
schemes floated by IVCF
 Can purchase equity / equity linked instruments /
debt / debt instruments, debentures of an IVCU or
of a IVCF
 The purchase / sale of shares, debentures and
units can be at a price that is mutually acceptable
to the buyer and the seller.

21. Benefits
 Exemption from pricing norms at the time of entry
as well as exit
 Exemption from lock-in period requirements when
the investee company goes public. FVCIs are
thus effectively allowed to exit investment,
immediately on listing of the investee company
 Exemption from Takeover Code in respect of
shares sold by the FVCI to the promoters of the
company, after the company goes public

22. How FCVI operates in India
 Foreign investor sets up offshore fund
 This offshore fund is registered with SEBI under FVCI
regulation
 Investor assigns a overseas manager
 Register the FCVI as a fund or a company
 Appoints an Indian advisor to handle domestic fund or
undertaking/company

23. Advantage India for Foreign
Investors
 Democratic environment
 Large growing market
 Pool of scientific, technological and managerial
manpower
 Cost effective and skilled
 Large pool of English speaking manpower
 Well established banking and vibrant capital
market
 Well established legal system with independent
judiciary

24. Thank You