Clarificatory guidelines on downstream investment by
Indian companies
This Press Note aims to bring clarity into the Policy for
downstream investment by investing Indian companies.
The Policy on downstream investment comprises policy for :
(a) Only operating companies — Foreign investment in
such companies would have to comply with the relevant sectoral conditions on
entry route, other conditions and caps with regard to the sectors in which
such companies are operating.
(b) Operating-cum-investing companies — Foreign
investment into such companies would have to comply with the relevant
sectoral conditions on entry route, other conditions and caps with regard to
the sectors in which such companies are operating. Further, the subject
Indian companies into which downstream investments are made by such
companies would have to comply with the relevant sectoral conditions on
entry route, other conditions and caps in regard of the sector in which the
subject Indian companies are operating.
(c) Only investing companies — Foreign investment in
investing companies will require prior Government/FIPB approval, regardless
of the amount or extent of foreign investment. The Indian companies into
which downstream investments are made by such investing companies would have
to comply with the relevant sectoral conditions on entry route, other
conditions and caps in regard of the sector in which the subject Indian
companies are operating.
(d) Others companies — Government/FIPB approval is
required for infusion of funds into companies that do not have any
downstream investments. Further, as and when such company commences
business(s) or makes downstream investment, it will have to comply with the
relevant sectoral conditions on entry route, other conditions and caps.
Downstream investments can be made by
operating-cum-investing companies, only investing companies and other
companies, subject to the following conditions :
(a) Such company must notify SIA, DIPP and FIPB of its
downstream investment within 30 days of such investment even if equity
shares/CCPS/CCD have not been allotted along with the modality of investment
in new/existing ventures (with/without expansion programme).
(b) Downstream investment by way of induction of foreign
equity in an existing Indian company to be duly supported by a resolution of
the Board of Directors supporting the said induction as also a shareholders’
agreement if any.
(c) Issue/transfer/pricing/valuation of shares shall be
in accordance with applicable SEBI/RBI guidelines.
(d) Investing companies would have to bring in requisite
funds from abroad and not leverage funds from domestic market for such
investments. This would, however, not preclude downstream operating
companies to raise debt in the domestic market.
This Press Note has amplified Annexure to Press Note 7
(2008), dated June 16, 2008 to the extent stated therein.
