October 2013
A. P. (DIR Series) Circular No. 42 dated 12th September, 2013
By Gaurang Gandhi, Chartered Accountant
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Notification No.FEMA.284/2013-RB dated 27th August, 2013 notified vide G.S.R.596 (E) dated 6th September, 2013
Foreign Investment in India–Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies
This circular has amended condition at (d) regarding downstream investments by an Indian company which is not owned and/or controlled by resident entity/entities. The amended condition is given in the table below:
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c.f. Annex to A.P.(DIR Series) Circular No. 1 dated 4th July, 2013
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Earlier Condition
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Revised Condition
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ParaE 6 (ii) (d)
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For the purpose of downstream investment, the Indian companies making the downstream investments would have to bring in requisite funds from abroad and not use funds borrowed in the domestic market. This: would, however, not preclude downstream operating companies from raising debt in the domestic market. Downstream investments through internal accruals are permissible by an Indian company engaged only in activity of investing in the capital of another Indian company/ ies, subject to the provisions above and as also elaborated below:
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For the purpose of downstream investment, the Indian companies making the d o w n s t r e a m investments would have to bring in requisite funds from abroad and not use funds borrowed in the domestic market. This would, however, not preclude d o w n s t r e a m operating companies from raising debt in the domestic market. Downstream investments through internal accruals are permissible by an Indian company, subject to the provisions of clause 6(i) and as also elaborated below:
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