OUTBOUND INVESTMENTS

UNDER FEMA REGULATIONS

Agenda
Provisions of FEMA, 1999 and Applicable Regulations Types of Investments Prohibited / Regulated /Permitted US$ 25,000 Scheme

JV Investments by Employees Portfolio Investments Agricultural operations overseas

Prohibited Investments
Reg 5 (2)
All Indian Parties prohibited from investment in a foreign entity engaged in
Real estate Business Banking Business

Reg 5(1)
All residents not to make direct investment o/s India except with general / specific approval .

Reg. 3 of Notif 120

All persons resident in India prohibited from issuing foreign security except
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General Permission
Reg 4 / Para A 4 General permission granted to residents for
Purchase / acquisition of foreign securities and sale thereof
Out of funds held in RFC account As bonus shares on securities already held Out of their Foreign Currency Resources outside India (when not permanently resident in India)
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Direct Investment o/s India

Automatic Route - Reg 6
Who can invest?
Company incorporated in India Body created under Act of Parliament Partnership firm regd under Indian Partnership Act Other entity as notified by RBI

Effective 27/3/2006, proprietary / unregistered partnership firms which are star export houses are also permitted subject to RBI approval Form ODI Conditions as per Annex to circular dt 27/3/2006
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Direct Investment o/s India

Automatic Route - Reg 6

Indian party permitted to make investment in overseas JV/WOS To submit Form ODA to designated branch of AD Limit: 200% of Net Worth as on date of last B/s Ceiling NA for investments out of EEFC a/c or funds raised thru ADRs/GDRs. Investment in Nepal/ Bhutan only in INR Investment in Pakistan not permitted under automatic route
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Direct Investment o/s India

Automatic Route - Reg 6 Contd.
Limit will include capital contribution in / loans granted to JV, and 50% of guarantees issued to / on behalf of JV. Conditions:
Loan / Guarantee may be given only to an overseas concern in which it has equity participation. Investor should not be on RBIs caution list / list of defaulters to banking system or under investigation All transactions to be routed thru one branch of AD. For acquisition of existing foreign co. share valuation required from Cat 1 Merchant Banker ( > US$ 5 Mn), or CA/CPA (< US$ 5 Mn)
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Share Swap Reg 8

Indian parties which have already made ADR/GDR may acquire shares of FC in same core activity under Scheme / guidelines Conditions
ADR /GDR listed on any stock exchange o/s India Max higher of (a) US$ 100 Mn; (b) 10 times export earnings in preceding financial year (including automatic investments in same financial year)

Share Swap Reg 8

ADR/GDR issue for purpose of acquisition is backed by fresh equity shares of Indian party. Holding in Indian entity does not exceed sectoral caps for FDI Valuation as per recommendation of investment banker (for unlisted shares) or current market cap based of last three months average price on stock exchange

Share Swap Reg 8

ADR/GDR issue for purpose of acquisition is backed by fresh equity shares of Indian party. Holding in Indian entity does not exceed sectoral caps for FDI Valuation as per recommendation of investment banker (for unlisted shares) or current market cap based of last three months average price on stock exchange

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Guarantees
Till 27/3/06 Only corporate promoters could offer guarantees for JV/WOS Now all Indian entities may offer any form of guarantee corporate/ personal /primary / collateral by promoter / group company / sister concern / associate companies

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