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Foreign companies are now permitted to have a majority stake in their
Indian affiliates except in a few restricted industries. In certain
specific industries, foreigners can even have holding upto 100 percent.
Investment through Stock Exchanges
Foreign Institutional Investors (FIIs) upon registration with the
Securities and Exchange Board of India (SEBI) and Reserve Bank of
India (RBI) are allowed to operate on the Indian stock exchanges subject
to the guidelines issued for the purpose by SEBI.
Important guidelines are as under :
Portfolio investment in primary or secondary market of a company
by all registered FIIs, NRIs and OCBs is subject to a ceiling of 30/40
per cent of issued share capital. In any one company, holding by a
single FII, NRI or OCB is subject to a ceiling of 10 percent of the
total issued capital. However, in applying the ceiling of 30/40 percent
the following are excluded:
Foreign investment under a financial collaboration which is permitted
upto 51 percent in all priority areas.
Investment by FII's through offshore single/regional funds, GDR's
and euro convertibles.
Disinvestment is allowed through a member broker of a Stock Exchange.
A registered FII is required to buy or sell securities on the Stock
Exchanges only for delivery. It is not allowed to offset a deal in
the same settlement. It is also not allowed to sell short, i.e., sell
a security without having the stock in its portfolio.
Investment in Euro Issues/Mutual Funds floated overseas
Foreign investors can invest in Euro issues of Indian companies and
in India-specific funds floated abroad.
Foreign brokers upon registration with the SEBI are now allowed to
route the business of their registered FIIs clients through the members
of Stock Exchanges. Guidelines for the purpose have been issued by
Asset Management Companies / Merchant Banking
Foreign participation in Asset Management Companies and Merchant
Banking Companies is permitted.
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