Foreign Direct Investment

and
Foreign Institutional Investor
presented by:
Vivek gupta
Saurabh singh
Ankit rathi
Mohit kaushik
 Presentation scheme
 FDI
Definition
Methods
Benefits
Disadvantages

 FII
Definition
Entities

 FDI vs FII
is defined as a company from one country
making a physical investment into building a
factory in another country

Foreign direct investment is a cross-border

corporate governance mechanism through
which a company obtains productive assets in
another country
 Methods of Foreign Direct Investments
The foreign direct investor may acquire 10% or
more of the voting power of an enterprise in an
economy through any of the following methods:

• by incorporating a wholly owned subsidiary or company

• by acquiring shares in an associated enterprise

• through a merger or an acquisition of an unrelated enterprise

• participating in an equity joint venture with another investor or

enterprise
 Benefits of Foreign Direct Investment
• it helps in the economic development
• transfer of technologies
• helps in the creation of new jobs
• easier for the business entities to borrow finance
at lesser rates of interest
• opens up the export window that allows these
countries the opportunity to cash in on their
superior technological resources
Disadvantages of Foreign Direct Investment

• there is a chance that a company may lose

out on its ownership to an overseas company.

• certain foreign policies are adopted that are

not appreciated by the workers of the
recipient country.

• defense of a country has faced risks.

 Foreign Institutional Investor
An investor or investment fund that is from or registered in a
country outside of the one in which it is currently investing.
Institutional investors include hedge funds, insurance
companies, pension funds and mutual funds

The term is used most commonly in India to refer to outside

companies investing in the financial markets of India.
International institutional investors must register with the
Securities and Exchange Board of India to participate in the
market. One of the major market regulations pertaining to FIIs
involves placing limits on FII ownership in Indian companies.
 Following entities / funds are eligible to get registered as FII:

 Pension Funds
 Mutual Funds
 Insurance Companies
 Investment Trusts
 Banks
 Charitable Trusts / Charitable Societies
 Difference b/n FDI and FII
• Foreign direct investment (FDI) flows into the
primary market whereas foreign institutional
investment (FII) flows into the secondary
market, that is, into the stock market
• FII is a fair-weather friend and can desert the
nation which is what is happening in India
right now,
Difference b/w INDIA-CHINA on basis of FDI

• India get just about $5-6bn as fdi, as

compared to china $60bn.

• India include only equity capital as FDI China

it includes trade credits, grants, bonds short
term and long term loans.
THANK YOU