1. Presentation on FEMA by CA. Sudha G. BhushanForeign Investment in India90th SMTP7th June 2009ICSIby CA. Sudha G. Bhushan

2. Contents Press note 1-Regulatory 2 Press note framework of Foreign Investment inIndia Press note 3-Press notes4 Press note issued by DIPP 2009 series Press note 1 dated 14th January2009 Press note 2 dated 13th February 2009 Press note 3 dated 13th February 2009 Press note 4 dated 25th February 2009Presentation on FEMA by CA. Sudha G. Bhushan 3. Foreign Investment in India Foreign Exchange Management Act Reserve bank of India Department of Industrial Policy and PromotionPresentation on FEMA by CA. Sudha G. Bhushan 4. Regulatory FrameworkPresentation on FEMA by CA. Sudha G. Bhushan 5. Foreign ExchangeReserve Bank of IndiaDepartment ofManagement Act,1999 Foreign Exchange Industrial policy and Section 6(3)(b) Management (Transfer Promotion Section 47or issue of security by Press Notesa Person residentoutsideIndia)Regulaitons,2000 Master Circular Foreign Investment inIndia dated 1 July 2008Presentation on FEMA by CA. Sudha G. Bhushan 6. Ways Foreign Direct InvestmentSchedule 1 Foreign institutional investor under PortfolioSchedule 2 investment Scheme Non resident Indian under Portfolio investmentSchedule 3 SchemePresentation on FEMA by CA. Sudha G. Bhushan 7. Continued NRI on non repatriation basis under the schemeSchedule 4 other than through PIS NRI/FIIs can purchase securities other than theSchedule 5 shares and debentures Foreign venture capital investor registered with SEBI may make investment in a venture capitalSchedule 6 fund or an Indian Venture capital undertakingPresentation on FEMA by CA. Sudha G. Bhushan 8. Limits Approval route [Latest press note 7/2008] Foreign DirectProhibited Sector Automatic Route [also those sectors notinvestmentspecifically mentioned under approval route or notspecifically prohibited Automatic Route]Foreign InstitutionalInvestors underFII- 24% of the paid up capital of the company.portfolio investmentSchemeNon resident Indian under Portfolio NRI- 10% of the paid up capital of the companyinvestment SchemePresentation on FEMA by CA. Sudha G. Bhushan 9. NRI on non repatriationbasis under the schemeNo Limitsother than through PISNRI/FIIs can purchase securities other thanSecurities other than shares and debenturesthe shares anddebentures Foreign venture capitalInvestments to be in accordance with SEBIinvestor registered with regulations dealing with VCF / FVCISEBI Presentation on FEMA by CA. Sudha G. Bhushan 10. Press Note 1Presentation on FEMA by CA. Sudha G. Bhushan 11. Policy for Foreign Direct Investment Publication of IndianPublication of facsimileeditions of foreign edition of foreignmagazines dealing withnewspapersnews and current affairsPresentation on FEMA by CA. Sudha G. Bhushan 12. Publication of facsimile edition offoreign newspapers 100% FDI permitted Prior approval of the Government Conditions: FDI is by the owner of the original foreign newspaper Publication by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. Subject to guidelines issued by Ministry of Information & BroadcastingPresentation on FEMA by CA. Sudha G. Bhushan 13. Publication of Indian editions of foreignmagazines dealing with news and currentaffairs Foreign investment up to 26% Prior approval of the Government Guidelines issued by the Ministryof Information &BroadcastingPresentation on FEMA by CA. Sudha G. Bhushan 14. Press note 2 Guidelines for calculation of Foreign investment i.e.Direct and indirect foreign investment in IndianCompaniesPresentation on FEMA by CA. Sudha G. Bhushan 15. Direct Foreign InvestmentNon resident entityOutside India In IndiaIndian CompanyPresentation on FEMA by CA. Sudha G. Bhushan 16. Indirect Foreign InvestmentNon Resident Entity Outside India Direct Foreign InvestmentIn India Indian Company Indirect Foreign InvestmentIndian Company Presentation on FEMA by CA. Sudha G. Bhushan 17. DefinitionsPresentation on FEMA by CA. Sudha G. Bhushan 18. Foreign Investment in Indian company shall include all types offoreign investments i.e. FDI, investment by FIIs(holding as on March31), NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) andconvertible preference shares, convertible Currency Debenturesregardless of whether the said investments have been made underSchedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by PersonsResident Outside India) Regulations[For the purpose of computation ofindirect Foreign investment]. Resident Indian Citizen (RICs) shall be interpreted in line with thedefinition of person resident in India as per FEMA, 1999, read inconjunction with the Indian Citizenship Act. Non resident entity (NREs) means a person resident outside Indiaas defined under FEMA 1999. Indian Company means a company registered or incorporated inIndia as per the Indian Companies Act, 1956. Investing Companymeans an Indian Company makingequity/preference/CCD investment into another Indian Company. Holding Company would have the same meaning as defined inIndian Companies Act 1956. by CA. Sudha G. BhushanPresentation on FEMA 19. Owned and controlledPresentation on FEMA by CA. Sudha G. Bhushan 20. By RICs and Indian companies, which areowned and controlled by RICsownedControlled More than 50% of the The RICs and Indianequity interest in it is companies, which arebeneficially owned byowned and controlled byRICs andIndian RICs, have the power tocompanies, which are appoint a majority of itsowned and controlled directorsultimately by RICs Presentation on FEMA by CA. Sudha G. Bhushan 21. By Non Resident EntitiesownedControlled More than 50% of the Non-residents have theequity interest in it is powerto appoint abeneficiallyowned by majority of its directorsnon-residents Presentation on FEMA by CA. Sudha G. Bhushan 22. Counting of foreign InvestmentDirectIndirectTotalPresentation on FEMA by CA. Sudha G. Bhushan 23. Counting the Direct Foreign Investment All investment directly by a non resident entity into theIndian company would be counted towards foreigninvestmentPresentation on FEMA by CA. Sudha G. Bhushan 24. Counting the Direct Foreign Investment Non resident entity Outside IndiaForeign Investment In India Indian Company Presentation on FEMA by CA. Sudha G. Bhushan 25. Counting of Indirect Foreign Investment Not counted as Indirect Foreign Investment Counted as Indirect Foreign Investment Presentation on FEMA by CA. Sudha G. Bhushan 26. NREsICs Investing IndianCompany RICs Indian CompanyPresentation on FEMA by CA. Sudha G. Bhushan 27. Not countedInvesting Indian CompanyIndirect Foreign Investment Indian Company if the investing Indian company is owned and controlled by RICs and/or by Indian companies which are owned and controlled by RICs Presentation on FEMA by CA. Sudha G. Bhushan 28. CountedInvesting Indian CompanyIndirect Foreign Investment Indian Company if the above conditions are not satisfied or if the investing Company is owned or controlled by NREs Presentation on FEMA by CA. Sudha G. Bhushan 29. Total InvestmentPresentation on FEMA by CA. Sudha G. Bhushan 30. NREs74% Investing IndianCompany30%51% Indian CompanyTotal Foreign Investment in subject Indian Company Direct (51%) + Indirect (30%)=81%Presentation on FEMA by CA. Sudha G. Bhushan 31. ExamplesPresentation on FEMA by CA. Sudha G. Bhushan 32. 1. Ownership and control with Indian entityNon resident entityOutside India Foreign Investment 49%In IndiaInvesting Indian CompanyIndirect Foreign Investment Indian Company Presentation on FEMA by CA. Sudha G. Bhushan 33. 2. Ownership with Non resident entityNon resident entity Outside IndiaForeign Investment 75%In India Investing Indian CompanyIndirect Foreign Investment Indian CompanyPresentation on FEMA by CA. Sudha G. Bhushan 34. 3. Control with Non resident entityNon resident entity Outside India Foreign Investment 25%In IndiaInvesting Indian Company Indirect Foreign InvestmentIndian Company Presentation on FEMA by CA. Sudha G. Bhushan 35. 4. Non resident entity Outside IndiaForeign Investment 75% In India Investing Indian Company26%Indirect Foreign Investment 26% Indian CompanyPresentation on FEMA by CA. Sudha G. Bhushan 36. ExceptionNon resident entityOutside IndiaForeign Investment 75%In IndiaOperating Cum Investing/Investing Indian Company100%Indirect Foreign Investment 75% Indian Company (100% subsidiary) Presentation on FEMA by CA. Sudha G. Bhushan 37. Addition ConditionsPresentation on FEMA by CA. Sudha G. Bhushan 38. The full details about the foreign investment to be furnished to thegovernment of India at the time of seeking approval Agreements which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority incase of sectors where government is required for Foreign Investment The balance equity in case of sectoral caps would specifically bebeneficially owned by RICs and Indian companies, owned and controlledby RICs Investment by RICs is counted as foreign investment ,If a declarationunder section 187C of the Indian Companies Act is made regarding thesame Presentation on FEMA by CA. Sudha G. Bhushan 39. Press Note 4Clarificatory Guidelines on downstreaminvestment by Indian Companies Presentation on FEMA by CA. Sudha G. Bhushan 40. Policy comprises Only operating companies Operating cum investing companies Only investing companies Non operative non investment CompaniesPresentation on FEMA by CA. Sudha G. Bhushan 41. DefinitionsPresentation on FEMA by CA. Sudha G. Bhushan 42. Indian Company same as press note 2 of 2009 series Operating Company is an Indian company which is undertakingoperations in various economic activities and sectors. Downstream Investment means indirect foreign investment by oneIndian company into another Indian company by way of subscription oracquisition in terms of press note 2 of 2009. Investing Company means an Indian company holding onlyinvestments into another Indian company, directly or indirectly, other thanfor trading of such holding/securities. Foreign Investment same as press note 2 of 2009 series Downstream investment means indirect foreign investment by oneIndian company into another Indian company by way of subscription oracquisition in terms of Press Note 2 of 2009.Presentation on FEMA by CA. Sudha G. Bhushan 43. Only operating company Foreign investment - to comply with the relevant sectoralconditions: on entry route conditions capswith regard to their relevant sectorsPresentation on FEMA by CA. Sudha G. Bhushan 44. Operating-cum-investing companies Foreign investment to comply with the relevant sectoralconditions with regard to the sectors in which suchcompanies are operating The subject Indian companies into which downstreaminvestments are made by such companies would have tocomply with the relevant sectoral conditions on entry route,conditions and caps in regard of the sector in which thesubject Indian companies are operating Presentation on FEMA by CA. Sudha G. Bhushan 45. PolicyNon resident entity Relevant sectoral conditions w.r.t. the sector in which the company is operatingOperating cum Investing Indian Company Relevant sectoral conditions w.r.t. thesector in which subject company is operatingIndian Company Presentation on FEMA by CA. Sudha G. Bhushan 46. Investing companies Foreign Investment in Investing Companies - priorGovernment/FIPB approval, regardless of the amount orextent of foreign investment The Indian companies into which downstream investmentsare made by such investing companies would have tocomply with the relevant sectoral conditions on entry route,conditions and caps in regard of the sector in which thesubject Indian companies are operating Presentation on FEMA by CA. Sudha G. Bhushan 47. PolicyNon resident entity Prior Government/FIPB Approval Investing Indian Company Relevant sectoral conditions w.r.t. thesector in which subject company is operatingIndian Company Presentation on FEMA by CA. Sudha G. Bhushan 48. Non operative Non investment Government/FIPB approval be required As and when such company commencesbusiness(s) or makes downstream investment itwill have to comply with the relevant sectoralconditions on entry route, conditions and capsPresentation on FEMA by CA. Sudha G. Bhushan 49. PolicyNon resident entity Prior Government/FIPB ApprovalNon operative and non Investing Indian Company Relevant sectoral conditions w.r.t. thesector in which subject company is operatingIndian Company Presentation on FEMA by CA. Sudha G. Bhushan 50. Additional ConditionsPresentation on FEMA by CA. Sudha G. Bhushan 51. SIA, DIPP and FIPB to be notified within 30 days ofinvestment Resolution of Board of Directors Issue/transfer/pricing/valuation of shares shall be inaccordance with applicable SEBI/RBI guidelines Investing companies to bring in requisite funds fromabroadPresentation on FEMA by CA. Sudha G. Bhushan 52. Press Note 3Guidelines for transfer of ownership or controlof Indian companies in sectors with caps fromresident Indian citizens to non-resident entitiesPresentation on FEMA by CA. Sudha G. Bhushan 53. GuidelinesIn Sector with caps, government approval/FIPB approvalwould be required in all cases where: An Indian company is being established with foreigninvestment and is owned or controlled by a non-residententity or The ownership or control is transferred/passed on to anon-resident entity as a consequence of transfer of sharesto non-resident entities through amalgamation, merger,acquisition etc. Presentation on FEMA by CA. Sudha G. Bhushan 54. sudhag999@gmail.comPresentation on FEMA by CA. Sudha G. Bhushan