Guidelines for calculation of total foreign investment i.e., direct and indirect foreign investment in Indian companies

Part C : RBI/FEMA

Guidelines for calculation of total foreign investment
i.e., direct and indirect foreign investment in Indian companies

This Press Note lays down the guidelines for calculation of
total foreign investment i.e., direct and indirect foreign investment
in Indian companies, accordingly :

1. Direct Foreign Investment

All investments made directly by a non-resident entity
into the Indian company would be counted towards foreign investment.

2. Indirect Foreign Investment

(a) Foreign investment through an investing Indian
company would not be considered for calculation of the indirect foreign
investment if the Indian company which is making the investment is ‘owned and controlled’ by resident Indian citizens and/or Indian companies
which are owned and controlled by resident Indian citizens.

(b) Foreign investment through an investing Indian
company which does not satisfy the condition mentioned above or where the
said investing company is owned or controlled by ‘non-resident
entities’, the entire investment by the investing company into the subject
Indian Company would be considered as indirect foreign investment.

3. Total foreign investment would be the sum total of
direct and indirect foreign investment.

4. This methodology of calculation would apply at every
stage of investment in Indian companies and thus to each and every Indian
company.

Full details about the foreign investment including
ownership details, etc. in Indian company(s) and information about the control
of the company(s) would be furnished by the company(s) to the Government of
India at the time of seeking approval.

In all sectors attracting sectoral caps, the balance equity
i.e., beyond the sectoral foreign investment cap, would specifically be
beneficially owned by/held with/in the hands of resident Indian citizens and
Indian companies, owned and controlled by resident Indian citizens. In the I &
B and Defence sectors where the sectoral cap is less than 49%, the company
would need to be ‘owned and controlled’ by resident Indian citizens and
Indian companies, which are owned and controlled by resident Indian citizens.