Summary on Foreign Direct Investment Government of India with the objective of attracting and promoting foreign direct investment

has put in place transparent, predictable and comprehensive policy framework on Foreign Direct Investment. The Department of Industrial olicy and romotion !DI ", #inistry of $ommerce % Industry makes policy pronouncements on FDI through ress &otes' ress (eleases. The same are notified by (eserve )ank of India as amendments to the Foreign *+change #anagement !Transfer or Issue of ,ecurity by ersons (esident -utside India" (egulations, .///. In case of any conflict, the relevant F*#0 &otification will prevail. The present consolidation is effective from 0pril 1, ./23 and subsumes and supersedes all ress &otes' ress (eleases'clarifications'circulars issued by DI . Entities into which FDI can be made: FDI can be made in a. Indian Company4 Indian $ompany will issue share capital b. Partnership Firm/ Proprietary Concern: Investment is allowed in artnership Firm or roprietary $oncern on repatriation basis when amount is invested by inward remittance or out of &(*'F$&( !)"'&(- account maintained with 0uthori5ed Dealers ' 0uthori5ed )anks and Firm or proprietary concern is not engaged in agriculture' plantation or real estate business or print media sector. rior approval of ()I is to be taken for investment with repatriation option. c. Venture Capital Fund VCF! 4 FDI is allowed in any Indian 6enture $apital 7ndertakings !I6$7s" '6enture $apital Funds !6$Fs" 'other companies. ,etting up domestic 6$F as a trust is allowed with Government approval and setting up domestic 6$F as incorporated company is allowed under 0utomatic approval route subject to the pricing guidelines, reporting re8uirements, mode of payment, minimum capitali5ation norms etc. d. "rust: FDI in Trusts other than 6$F is not permitted e. #imited #iability Partnership ##P!: 99 with the Government approval are allowed in sectors where 2//: FDI is allowed through automatic route and there are no FDI linked performance conditions. 99 s with FDI will not be allowed to operate in agricultural'plantation activity, print media or real estate business. 99 with FDI are not allowed make downstream investment. Investment in 99 s by Foreign Institutional Investors !FIls" and Foreign 6enture $apital Investors !F6$Is" will not be permitted. 99 s will also not be permitted to avail *+ternal $ommercial )orrowings !*$)s". f. other entities: FDI in resident entities other than those mentioned above is not permitted "ypes o$ Instruments issued: Indian companies can issue e8uity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and

mandatorily convertible preference shares subject to pricing guidelines'valuation norms prescribed under F*#0 (egulations. rice' conversion formula of convertible capital instrument shall be determined upfront at the time of issue of capital instrument which in any case should not be lower than fair value worked out at the time of issue of capital instrument issued. -ther types of reference shares'Debentures i.e. non;convertible, optionally convertible or partially convertible for issue of which funds have been received on or after #ay 2, .//< are considered as debt. The inward remittance received by the Indian company vide issuance of D(s and F$$)s are treated as and counted towards FDI. Issue o$ shares under FCC%/&D'/(D'4 !i" Indian companies can also issue F$$)'D(!0D(s ' GD(s" in accordance with the ,cheme for issue of Foreign $urrency $onvertible )onds and -rdinary ,hares !Through Depository (eceipt #echanism",cheme, 2==3 and guidelines issued by Government of India from time to time. !ii" 0D(s'GD(s are issued by $ompany which is eligible to issue shares to person resident outside India under the FDI policy. !iii"Indian listed $ompany which is not eligible to raise fund from the Indian $apital #arket including the company restrained from accessing securities market by ,*)I are not eligible to issue 0D(s'GD(s. !iv" 7nlisted company re8uire prior or simultaneous listing in the domestic market to issue 0D(s ' GD(s. If 0D(s'GD(s are already issued by such companies then such companies have to list in domestic market on making profit or within three years of such issue of 0D(s'GD(s whichever is earlier. !v"The 0D( ' GD( proceeds can be utili5ed for first stage ac8uisition of shares in the disinvestment process of ublic ,ector 7ndertakings ' *nterprises and also in the mandatory second stage offer to the public in view of their strategic importance. !vi" 0D(s ' GD(s will be issued at the price as determined under the provisions of the ,cheme of issue of Foreign $urrency $onvertible )onds and -rdinary ,hares !through Depository (eceipt #echanism" ,cheme, 2==3 and guidelines issued by the Government of India and directions issued by the (eserve )ank, from time to time. "wo way $ungibility scheme: In this scheme, initiated by Government of India, a registered stock broker in India can purchase shares of an Indian company from market for conversion into 0D(s'GD(s based on the instruction received from overseas investors. ,ponsored 0D('GD( issue4 0n Indian $ompany can also sponsor 0D('GD(. 0 company can offer its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, 0D(s ' GD(s can be issued abroad. The proceeds of the 0D( ' GD( issue are remitted back to India and

distributed among the resident investors who had offered their (upee denominated shares for conversion. Issue/ trans$er o$ shares: the capital instrument will be issued within 2>/ days from the date of receipt of the inward remittance received through normal banking channels including escrow account opened and maintained for the purpose or by debit to the &(*'F$&( !)" account of the non;resident investor failing which amount of consideration so received shall be refunded immediately to the non resident investor by outward remittance through normal banking channels or by credit to the &(*'F$&( !)" account, as the case may be. Failure to issue shares within 2>/ days or refund the amount as per above provision would be considered as contravention under F*#0 and will attract penalty. Issue price o$ shares: shall not be less than ; rice of shares issued to persons resident outside India

a. the price worked out in accordance with the ,*)I guidelines where the shares of the company is listed on any recognised stock e+change in India? b. the fair valuation of shares done by a ,*)I registered $ategory ; I #erchant )anker or a $hartered 0ccountant as per the discounted free cash flow method, where the shares of the company is not listed on any recognised stock e+change in India ? and c. the price as applicable to transfer of shares from resident to non;resident as per the pricing guidelines laid down by the (eserve )ank from time to time, where the issue of shares is on preferential allotment. Investment may be made by non resident !including &(I" at face value subject to their eligibility to invest under FDI scheme where investment in Indian $ompany is made in compliance with companies 0ct 2=1@ by subscribing to #emorandum of 0ssociation. Foreign Currency &ccount: Indian companies which are eligible to issue shares to person resident outside India under the FDI olicy may be allowed to retain the share subscription amount in a Foreign $urrency 0ccount, with the prior approval of ()I.

C&PS )* I*VES"+E*"S E*"', C)*DI"I)*S )* I*VES"+E*" the investment'investors are re8uired to comply with all relevant sectoral laws, regulations, rules, security conditions, and state' local laws' regulations

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Foreign investment into an Indian company, engaged only in the activity of investing in the capital of other Indian company'ies, will re8uire prior Government'FI ) approval. $ore Investment companies will be re8uired obtain prior Government ' FI ) approval and will have to additionally follow ()I (egulatory Framework for $I$s. Indian companies which does not have any operations and downstream investment will be re8uired to obtain Government ' FI ) approval and when such companies commences business or makes downstream investment they will have to comply with the relevant sectoral conditions on entry route, conditionalities and cap Direct foreign investment A means investment by non resident in an Indian company Indirect foreign investment A means Indian investing company having foreign investment Indirect Foreign Investment includes all types of foreign investment like FDI, investment by FIIs? &(Is, 0D(s, GD(s, Foreign currency convertible bonds !F$$)", fully, compulsorily and mandatory convertible preference shares and fully, compulsorily and mandatorily convertible debentures (uidelines $or calculation o$ total $oreign investment in an Indian company The total foreign investment is sum total of Direct Foreign Investment of4 i! Direct Foreign Investment which means all investment directly by a non resident entity into the Indian $ompany is counted towards direct investment ii! Indirect Foreign Investment which means the entire investment by the investing company which is owned and controlled by non resident entities into the subject Indian company is considered as Indirect Foreign Investment &ote4 Foreign investment through the Indian company is not considered as Indirect foreign investment The above calculation apply at every stage of investment into Indian companies and to each and every Indian $ompany 0dditionally companies need to fulfill conditions like furnishing full details of the foreign investment including ownership details, information control about the company, informing about the agreement which have effect on the appointment of the board of Directors or on the e+ercise of voting rights or creating voting rights disproportionate to shareholding or incidental matters thereto for seeking Government approval. In all sectors attracting sectoral caps, the balance e8uity i.e.

beyond the sectoral foreign investment cap, would specifically be beneficially owned by'held with'in the hands of resident Indian citi5ens and Indian companies, owned and controlled by resident Indian citi5ens. In the I% ) and Defence sectors where the sectoral cap is less than B=:, the company would need to be owned and controlledC by resident Indian citi5ens and Indian companies, which are owned and controlled by resident Indian citi5ens. The policy and methodology does not apply to Insurance ,ector and to the foreign investment already made in accordance with the guidelines in e+istence prior to February 23, .//= will not re8uire any modifications to confirm to these guidelines FDI is prohibited in: !a" 9ottery )usiness including Government 'private lottery, online lotteries, etc. !b" Gambling and )etting including casinos etc. !c" $hit funds !d" &idhi company !e" Trading in Transferable Development (ights !TD(s" !f" (eal *state )usiness or $onstruction of Farm Douses !g" #anufacturing of $igars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes !h" 0ctivities ' sectors not open to private sector investment e.g. 0tomic *nergy and (ailway Transport !other than #ass (apid Transport ,ystems". &ote4 Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for 9ottery )usiness and Gambling and )etting activities