Do you wish to make direct investment in equity share capital of an overseas joint venture company (JV) or wholly owned subsidiary (WOS) abroad?


Before making any overseas investment in a Joint venture or wholly owned subsidiary company, consider the following things:

  • Whether your company wants to promote global business in terms of foreign earnings like dividend, royalty, technical know-how fee and other entitlements on such investments.
  • Whether your company wants to make it a major source of increased exports of plant and machinery and goods from India;
  • Whether your company wants to make such investment as a medium of economic co-operation between India and other countries;
  • Whether your company wants to do it for the transfer of technology and skill or for sharing of results of R&D, or for having an access to the wider global market or for the promotion of brand image or for generation of employment and utilization of raw materials available in India and in the host country.


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Note that JV means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country in which your company makes a direct investment.

Further note that WOS means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by your company.

Keep in mind the following:

  • Indian party can make direct investment in a foreign entity engaged in real estate business or banking business only with the prior approval of RBI;
  • Your company should not be on the RBI’s exporters caution list or list of defaulters to the banking system circulated by the RBI or under investigation by any investigation/enforcement agency or regulatory body;
  • Your company has submitted up to date returns in its annual performance report in respect of all overseas investments in the format given;
  • The Indian party routes all transactions relating to the investment relating to JV/WOS through only one branch of an authorized dealer to be designated by it but your company may designate different branches of authorized dealers for different JVs/WOSs outside India;




Check whether your company’s total financial commitment will exceed 400% of the net worth of the Indian party as on the date of the last audited balance sheet.

Keep in mind that in determining total financial commitment within 400% of the net worth of the following shall be reckoned;



  • Remittance by market purchases, namely in freely convertible currencies, in case of Bhutan, an investment made in freely convertible currencies or equivalent Indian rupees and in case of Nepal investment made only in Indian rupees;
  • Capitalization of export proceeds and other dues and entitlements as mentioned in regulation 11;
  • 100% of the value of guarantees issued by the Indian party to or on behalf of JV/WOS;
  • The amount utilized will be raised by the issue of GDRs/ADRs by the Indian party.
  • With the other parameters of the ECB guidelines, external commercial borrowing will be in conformity.
  • A swap of shares.
  • GDR/ADR stock swap is subjected to the valuation norms and the sectoral cap.

Further, check whether your company’s direct investment is made in an overseas JV or WOS engaged in a bonafide business activity.




When we do investment in Nepal, it is permitted only in Indian rupees and if you invest in Bhutan, it is permitted in Indian rupees as well as in freely convertible currencies.

 All dues receivable on investments made in freely convertible currencies, as well as their sale/winding up proceeds, are required to be repatriated to India in freely convertible currencies only. When we do investment in Pakistan, the automatic route facility would not be available.

Note that for the purpose of a net worth of your company net worth of your holding company or your subsidiary company may be taken into account to the extent not availed of by the holding company or subsidiary company independently and has furnished a letter of disclaimer in favor of your company.

Keep in mind that the ceiling of investment of 400% mentioned above will not apply where the investment is made out of balances held in your company’s EEFC account.

Note that your company may extend a loan or a guarantee to or on behalf of the JV/WOS abroad within the permissible financial commitment, provided that your company has made an investment by way of contribution to the entity capital of the JV.

Your company may also undertake agricultural operations including purchase of land incidental to such activity either directly or through your company’s overseas offices if the following terms and conditions are satisfied:

  • Your company is otherwise eligible to make an investment under regulation 6 and such investment is within the overall limits as specified in regulation 6;
  • For the purpose of investment by acquisition of land overseas the valuation of the land is certified by certified valuer registered with the appropriate valuation authority in the host country.

No fee is required to be paid for making this application to the authorized dealer;

When your company does not satisfy the norms for eligibility under the regulations, then do make the application to the chief general manager, RBI, exchange control department.

In case of an automatic route- part I and II form ODI has to be submitted to the chief general manager, reserve bank of India.

In case of approval route- part I of form ODI, along with the supporting documents, is required to be submitted after scrutiny and with specific recommendations by the designated AD category-I bank.

Attach the following documents to Form ODI:


Draft joint venture agreement or memorandum and articles of association in the case of a wholly owned subsidiary, specifying the equity structure, management, rights and responsibilities of shareholders and also draft agreements for the supply of technical know-how, management, and other services, if applicable.

A detailed report/feasibility report incorporating, inter alia, projected funds flow statement and balance sheet for 5 years the information on various leverage and profitability ratios like debt-equity ratio, debt service coverage ratio, return on investments, etc. of the foreign concern accompanied by the statement from a chartered accountant certifying the ratios and projections given in the application.

A report from the bankers of your company in sealed/closed cover;

The latest balance sheet and profit and loss account along with directors’ report of the Indian party and of the foreign collaborator in the case of a joint venture.

Additional documents asunder, if the application is made for a partial/full takeover of an existing foreign concern:

  • A copy of the certificate of incorporation of the foreign concern;
  • The latest annual accounts of the foreign concern; and
  • A copy of the share valuation certificate from a chartered accountant for a certified public accountant and where the investment is more than the US $5 million by a category I merchant banker registered with SEBI or an investment banker/merchant banker registered with the appropriate authority in the host country.

A copy of the resolution of the board of directors of your company approving the proposed investment;

Where investment is in the financial services sector, a certificate from chartered accountant/auditors firm to the effect that your company:


  • Has earned a net profit during the preceding 3 years from the financial services activity;
  • Is registered with the regulatory authority in India for conducting the financial services activities;
  • Has obtained approval from the concerned regulatory authorities both in India and abroad for venturing into such financial sector activity;
  • Prudential norms have been fulfilled relating to capital adequacy which is prescribed by the concerned regulatory authority of India.

In case of an Indian party is seeking approval for acquisition of overseas concern through bidding/tender procedures by remittance towards earnest money deposit (EMD) or issue of bid bond guarantee) Indian party should approach the RBI at least one month in advance from the last date for submission of bid to the overseas authority with the following documents:

  • Application in form ODI to the extent applicable;
  • Certified relevant extracts of the terms and conditions of a bid;
  • Chartered accountant’s certificate indicating the valuation of shares and assets of the overseas concern justifying the acquisition price where applicable and
  • A project/feasibility report.

In case the Indian party wins the bid, it should submit through the authorized dealer concerned a report to the RBI in form ODI within 30 days of effective the final remittance.

In case, where the bid is won by the Indian party but the terms and conditions of the acquisition, are different from those furnished earlier to the RBI, the Indian party should apply afresh to the reserve bank in form ODI for prior approval before putting through the transaction.

Note that RBI will take into account the following factors while considering the aforesaid application:


  • Prima facie viability of the joint venture/wholly owned subsidiary outside India;
  • Contribution to external trade and other benefits which will accrue to India through such investment;
  • Financial position and business track record of your company and the foreign entity;
  • Expertise and experience of your company in the same or related line of activity of the joint venture or wholly owned subsidiary outside India.

Also, note the following:

  • On receipt of the application, the RBI will allot a unique identification number for each joint venture or wholly owned subsidiary outside India and your company should always quote the said number in all its communication and reports to the RBI and the authorized dealer.
  • Your company may also make direct investment outside India as above way of capitalization in full or part of the amount due to your company from the foreign entity as follows:
    • Payment for export of plant, equipment, machinery and other goods/software to the foreign entity.
    • Fees, commissions, royalties of your company due from the foreign entity for the supply of technical know-how consultancy, managerial or other services.
  • In case of (2) above, remember that where the export proceeds have remained unrealized beyond a period of 6 months from the date of export, such proceeds will not be capitalized without the prior permission of the RBI.
  • The general permission under regulation 6 does not include investment proposals which envisage setting up a holding company or a special purpose vehicle abroad, which would in turn set up one or more step down subsidiaries as operating units.
  • Listed companies are permitted to invest abroad in shares, rated bonds or fixed income securities in companies listed on a recognised stock exchange provided such investment should not exceed 50% of the net worth from the Indian company on the date of every transaction and the last audited balance sheet relates to sale and purchase, which should be routed through the designated branch of an authorised dealers in India.
  • RBI has revised the reporting package on overseas direct investment (ODI) by Indian parties. ODI forms would be received the reporting package on overseas direct investment (ODI) by Indian parties. ODI forms would be received online by RBI. The new system will also enable online generation of unique identification number (UIN) acknowledgment of remittances and filing of the annual performance reports (APRs) and easy accessibility to data at the AD level for reference purposes.

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