Skip to content

CS Professional · Strategic Management and Corporate Finance · Foreign Funding - Institutions

Which one of the following is treated as FDI, as distinct from foreign portfolio investment, under India's FEMA non-debt instruments framework?

The 15% investment in an unlisted Indian company is FDI. Investments in unlisted companies are FDI, while in a listed company the threshold is 10% of fully diluted paid-up equity. The 6% and 8% listed holdings fall below it and count as portfolio investment.

  1. AA non-resident acquiring 6% of the paid-up equity capital of a listed company on the exchange
  2. BA non-resident acquiring 15% of the paid-up equity capital of an unlisted Indian company through a private issueCorrect
  3. CA non-resident holding 8% of the equity of a listed company through a registered FPI
  4. DA non-resident buying units of a mutual fund

Explanation

Investment of 10% or more of the post-issue paid-up equity capital on a fully diluted basis in a listed company is FDI, and any investment in an unlisted company by a non-resident is FDI. Below 10% in a listed company is portfolio investment. Hence the 15% unlisted investment is FDI, while the 6% and 8% listed holdings are below the 10% threshold.

Did you get it right without looking?

One question tells you little. A timed set on Foreign Funding - Institutions shows your real accuracy, how long you take and where you lose marks.

Practise Foreign Funding - InstitutionsFree diagnostic mock

More Foreign Funding - Institutions questions