Foreign Direct Investment

FDI in Indian Company

Under the Companies Act, 2013, a foreign entity can incorporate a company and set up its business operations in India through Joint Ventures with any other Indian establishment or on its own as wholly owned subsidiary of a foreign company. On the other side, a foreign entity can also enter indian market by establishing Project office, Liaison office or Branch office instead of incorporating a distinct entity. Moreover, permitted activities under Foreign Exchange Management Regulations, 2000 can also be undertaken by these offices. Financial and economic stability along with the political conditions are good to be taken into account while investing in any developing country. The good news is that India is one of the rapidly growing economies of the world and has been ranked among the top 3 destinations in terms of inbound investments.


FVCI (Foreign Venture Capital Investors)
Pension/Provident Fund
Financial Institutions

2. Company:
Foreign Trust
Sovereign Wealth Funds
NRIs (Non Resident Indians)/ PIOs (Persons of Indian Origin)

3. Foreign Institutional Investors:
Private Equity Funds
Partnership / Proprietorship Firm Others

FAQ for FDI in India

Q 1: How can an Indian company receive foreign investment?

Answer: The routes under which foreign investment can be made is as under:

Automatic Route: Foreign Investment is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India, in all activities/ sectors as specified in the Annex B of Schedule 1 to Notification No. FEMA 20.
Government Route: Foreign investment in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance. Application can be made in Form FC-IL, which can be downloaded from Plain paper applications carrying all relevant details are also accepted. No fee is payable.

Q 4: What is a convertible Note?

Answer: A Convertible Note is an instrument issued by a start-up company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument.