Exciting Developments in relation to Foreign Investment Policy in India!

The Reserve Bank of India (RBI) has introduced further liberalizations in Foreign Direct Investment (FDI) rules through its latest Master Direction on Foreign Investment, dated January 20, 2025.

Key changes:

1. Flexible Acquisition Options for FOCC: Previously, Foreign Owned and Controlled Corporations (FOCCs) with over 50% foreign shareholding investing in another Indian entity for downstream investments were required to remit the entire deal value upfront. The revised framework introduces much needed flexibility, aligning with the standard FDI provisions:

a) Deferred payment – 25% of the transaction value may be deferred over a period of 18 months.

b) Share Swaps – downward investment through share swaps is now permissible i.e. issue of its own shares in lieu of receipt of shares of the investee company.

2.Tenor Flexibility for CCD/CCPS: The tenor of Compulsorily Convertible Debentures (CCDs) and Compulsorily Convertible Preference Shares (CCPS) can now be amended in accordance with the Companies Act, 2013. This is especially beneficial when share conversion needs to be postponed due to fluctuating market conditions.

These changes significantly enhance regulatory clarity and operational flexibility for M&A and investments. This would aid in fostering global-local partnerships, boost investor confidence, and catalyze growth for businesses across India.

What does this mean for you? Let’s connect at dhairya.c@server5.the-treelife.com for a discussion.

Link to the updated Master direction on Foreign Investment – https://lnkd.in/dUC9sxUD 

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