3. Example –
-STAR India, a unit of 21st Century Fox, has
acquired the entire broadcast business of MAA
Television Network Ltd.
-Infosys has announced that it would buy
Panaya.
4. APPLICANT PROCEDURES
An application for registration has to be made in Form A, the
format of which is provided in the SEBI(FII) Regulations, 1995
and submitted with under mentioned documents in duplicate
addressed to SEBI as well as to Reserve Bank of India (RBI)
and sent to the following address within 10 to 12 days of
receipt of application.
Address for application
The Division Chief
FII Division
Securities and Exchange Board of India,
224, Mittal Court, 'B' Wing, 1st Floor,
Nariman Point, Mumbai - 400 021.
INDIA.
5. ELIGIBILITY
The applicant is required to have the permission under
the provisions of the Foreign Exchange Management
Act, 1999 from the Reserve Bank of India
Applicant must be legally permitted to invest in
securities outside the country or its in-corporation /
establishment.
The applicant must be a "fit and proper" person
The applicant has to appoint a local custodian and enter
into an agreement with the custodian. Besides it also
has to appoint a designated bank to route its
transactions
Payment of registration fee of US $ 5,000.00
7. SALIENT FEATURES OF FIIS
An initial registration with SEBI is required to enter the market
Nominee companies, affiliated and subsidiary companies of an FII
will be treated as separate FIIs. May seek separate registration
FIIs shall also seek various permissions under FERA from the RBI,
both SEBI and RBI registration will be under a single window
approach
FIIs seeking initial registration with SEBI shall be required to hold a
registration from the securities commission in their country of
domicile
7
8. CONTD
SEBI’s initial registration would be valid for 5 years. RBI’s
general permission under FERA to the FII will also hold
good for five years, both will be renewable
Disinvestment will be allowed only through stock
exchanges in India including OTCEI
SEBI may permit sales other than through stock
exchanges, provided the sale prices are not significantly
different
All secondary market operations would be only through
the recognized intermediaries. FIIs not to take delivery
of purchased and give delivery of sold securities
9. TYPES OF FIIS
Pension Funds: It manages pension and health benefits for
employees, retirees, and their families
Mutual Funds: Collective investment scheme that pools money
from many investors and invests it in stocks, bonds, short-term
money market instruments, or other such securities
Investment Trust: A way of investing money with others to
participate in a wider range of investments than feasible for
most individual investors, and to share the costs and benefits
of doing so
9
10. TYPES OF FIIS (CONTD..)
Investment Banks: A financial institution that raises
capital, trades in securities and manages corporate
mergers and acquisitions
Endowment Funds: A transfer of money or property
donated to an institution, usually with the stipulation
that it be invested, and the principal remain intact in
perpetuity or for a defined time period
Charitable Trusts: A trust created for advancement of
education, promotion of public health and comfort,
relief of poverty, furtherance of religion, or any other
purpose regarded as charitable in law
10
11. TYPES OF FIIS (CONTD..)
Asset Management Companies: It is an investment
management firm that invests the pooled funds of retail
investors in securities in line with the stated investment
objectives
Nominee Companies: Company formed by a bank or
other fiduciary organization to hold and administer
securities or other assets as a custodian on behalf of an
actual owner
Institutional Portfolio Managers: Investments by
registered Foreign Institutional Investors or Non-
Resident Indians made through a stock exchange
12. FII REGULATION
Foreign Institutional Investors (FIIs) are registered under
the Securities and Exchange Board of India (SEBI) . In
accordance with Section 2(f) of the SEBI (FII) Regulations
1995
Registration of FIIs and monitoring of investments made
by them through the portfolio investment route under
the SEBI (FII) regulations 1995
Background of FII in India
Ministry of Finance set up a Working Group on Foreign
Investment (WGFI) in 2010
Committee on Rationalization of Investment Routes and
Monitoring of Foreign Portfolio Investments” set up
under K. M. Chandrashekhar
SEBI issued operating guidelines for Designated
Depository Participants (DDP) for granting registration to
Foreign Portfolio Investors (FPI).
13. FII REGULATIONS : TRANSITION TO FPIS
WHO IS AN FPI :
An FPI has been defined to mean a person who satisfies the prescribed eligibility criteria and
has been registered under the FPI Regulations. All existing Foreign Institutional Investors (FIIs)
and QFIs are to be merged into one category called FPI.
ELIGIBILITY CRITERIA FOR FPI :
It should not be Indian resident or a Non-Resident Indian.
It should be a resident of a country: whose central bank is a member of the Bank for
International Settlements;
against whom the Financial Action Task Force (FATF) has not issued any warnings
It should legally be permitted to invest in securities outside the country of its incorporation
or establishment or
place of business.
REGISTRATION OF AN FPI :
FPI registration is to be undertaken and granted by Designated Depository Participants (DDPs)
on behalf of SEBI.
REGISTRATION FEES :
Category I FPIs are exempt from payment of registration fees.
A registration fee of USD 3,000 and USD 300 is payable by Category II & III FPIs respectively
for a block of three years. 13
14. CATEGORIES OF FPI
• Government related investors such as Central Bank
• International/Multilateral organizationsCategory-1
• Appropriately regulated Broad based funds.
• Mutual funds,insurance companiesCategory-2
• Charitable trusts, corporate bodies, individuals
• Not covered under Category-1Category-3
14
CERTIFICATE OF REGISTRATION:
Applicant to
furnish any info
as required by
SEBI
Within 30 days of
application D.P.
shall grant the
certificate of
registration
Liable for
rejection in case
of false and
misleading
information
15. INVESTMENT RESTRICTIONS
A FPI shall be permitted to invest only in the following
securities:
Securities in the primary and secondary markets;
Units of schemes floated by domestic mutual funds
Collective investment schemes;
Derivatives traded on a recognized
Stock exchange;
Treasury bills and dated government securities;
Commercial papers issued by an Indian company;
Rupee denominated credit enhanced bonds;
Security receipts issued by asset reconstruction
companies;
Perpetual debt instruments
Capital instruments;
Debentures (NCDs)/ bonds issued by an Indian company in
the infrastructure sector.
DDP shall ensure that only registered FPIs invest in the
Indian capital markets.
Securities shall be registered in the name of FPI as a
beneficial owner for the purpose of Depositories Act,1996 15
16. Need For FII
• Supplements and augmented domestic savings and domestic
investment without Increasing the foreign debt of our
country
• Capital inflows to the equity market increase stock prices,
lower the cost of equity capital and encourage the
investment by Indian firms
• Provide access to cheap Global Credit
17. P NOTES
P-notes are a way for foreigners to invest in the Indian
markets without registering themselves with
Securities and Exchange Board of India
To avail advantage of the tax laws of certain countries
Who Invests in Participatory Notes?
Investors ineligible to apply for FII status
The participatory note route is quick and easy
To hide their Identity
18. P-NOTES PROCESS
UK based investor
Foreign Broking House
(UK)
Foreign Broking House
(India)
X Shares
Issues P-notes with X
shares as underlying asset
Conformation of Shares
Purchased
Buy X shares
Buy X
Shares
Buys
19. ADVANTAGES OF P-NOTES
Convenient for foreign investors, because participatory
notes are like contract notes transferable by approval
P-note provide high degree of anonymity
Some of the entities want their investment through P notes
to take advantage of the tax laws of certain preferred
countries
It is important source of investment in Indian capital market
It strengthen rupee against the dollar
20. FII OUTFLOW IN 2015
There are two main reasons behind the outflow of FIIs:
China Slow down
a) Global Slowdown
b) Yuan devaluation
c) FIIs general sentiment for EMs affected by China slowdown
Hike in the interest rate by US Fed
a) Hike in interest appreciates the dollar and depreciates rupee
b) Demand for dollar increases, which leads to the outflow of
FII from Indian market
21. EFFECTS OF FII FLOWS ON INDIAN STOCK MARKET
While strong inflow of funds from
foreign institutional investors (FIIs) has
been a reason to cheer, it could turn
into a nightmare if the global investors
make a sudden exit send the markets
crashing
FII flow has been on the rise since
start of liberalization
In past 4 years there has been more
than $41 trillion worth of FII funds
invested in India
As FIIs purchase and sell stocks , it
results in high volatility in stock markets
Outside cash flows through FIIs, in
India, are vital from the strategy point
of view
22. EFFECT OF FII ON INDIAN ECONOMY
•FIIs as major
cause of market
crash
•FIIs bowed out
from capital
market with
more than
10000 crore
•Began with
Reliance power
and future
capital holdings
issues
23. FII FLOWS : SECTOR WISE
Sector wise FII for 2014-15
Automobiles & Auto Components Total Financial Services
Banks Other Financial Services1
Capital Goods Chemicals & Petrochemicals
Coal Commercial Services & Supplies
24. FII VS FDI
FII
Outside companies/investors investing in financial markets of
India
International institutional Investors must register with Securities
and Exchange Board of India to participate in the market
FDI
An investment made by a company in one country, into a
company based in another country
The investing company may make its overseas investment in a
number of ways – either by setting up a subsidiary or associate
company in the foreign country, by acquiring shares of an
overseas company or through a merger or joint ventre.
It enables a degree of control in the company
Brings long term capital as compared to FII
25. FII & EXCHANGE RATE MOVEMENT
As a result of the incessant shift in the economic
structure of scope and area of business, exchange rates
gathered attention and became an imperative
determinant for sustainable business operations
This emergent consequence has made FII’s and
exchange rates, two extremely vital variables for
economy
Demand & Supply
Say US imports from India, then it is creating a demand
for rupee thus Indian Rupee appreciates w.r.t the dollar.
If India imports then the dollar appreciates w.r.t the
Indian Rupee
