Foreign Institutional Investment
FDI & FIIPresentation by S.ALEKHYA KUMARI13P71E00421An investment made by a company or entity based in one country, into a company or entity based in another country.
Foreign direct investment is the participation of one countrys resources in another country's business. Many times people and technology are transferred between the two countries. Most foreign direct investment happens between the most developed countries.A foreign direct investor can be a government body, a company, or an individual. China has much foreign direct investment in it from other countries. India was the second most. Foreign direct investment
7/10/2014pushpa's team2FDI Investment schemesAvailable Financial Institutions : Equity shares , compulsory convertible preference shares & compulsorily convertible debentures.
Investors who are not Eligible : citizens & entities of Pakistan.
Available with Approval of FIPB (AP (DIR) No.22 dt.19/12/2007) citizens & entities of Bangladesh.
7/10/2014pushpa's team3Contribution of FDI inflows into India :
Singapore : USD 5.98 billion.Mauritius : USD 4.85 billion.UK USD : 3.21 billion.Netherlands : USD 2.27 billion. According to the Department of Industrial Policy and Promotion (DIPP) data FDI into India grew by 8 percent year-on-year to USD 24.3 billion in 2013-14.
In 2012-13, FDI aggregated at USD 22.4 billion.
7/10/2014pushpa's team47/10/2014pushpa's team5The highest FDI came in 2013-2014
Services USD 2.22 billion
Automobiles USD 1.51 billion
Tele communications USD 1.3 billion
Pharmaceuticals USD 1.27 billion
Construction development USD 1.22 billion The country needs foreign investment to help regain its growth momentum. Indias economic growth slowed to a decades low of 4.5 percent in 2012-13.
The country is estimated to require about USD 1 trillion between 2012-13 and 2016-17, the 12th Five-Year Plan period, to fund infrastructure projects.
7/10/2014pushpa's team6FDI INVESTMENT SECTORS7/10/2014pushpa's team7
Pros & cons of FDIAdvantages :
Economic growth.Employment & Skill levels.Technology & Knowledge transfer.Trade.Globalization.Access to International markets.
Share of R&D methods , techniques b/w its parent & foreign firms.
There is a chance of leaking/revealing one countrys secrets with the opponent countries.
Not all foreign countrys can accept the cultures & customs of the foreign countrys(unfavorable environmental conditions) .
7/10/2014pushpa's team88Prohibited sectors for FDIGambling & BettingLottery BusinessAtomic EnergyRetail TradingAgricultural / plantation activities of Agriculture. (Excluding Mushrooms , Animal husbandry , Development of seeds.., under services & controlled cond., related to agro & allied sectors ; plantations other than tea).7/10/2014pushpa's team9The term foreign institutional investment denotes all those investors or investment companies that are not located within the territory of the country in which they are investing. These are actually the outsiders in the financial markets of the particular company. Foreign institutional investment is a common term in the financial sector of India. The type of institutions that are involved in the foreign institutional investment are as follows:
Mutual Funds Hedge Funds pension Funds Insurance Companies.Foreign Institutional Investment
7/10/2014pushpa's team10Banks Charitable trusts/societiesMutual funds PensionsInsurance / reinsurance companiesFoundationsEndowmentsInvestment trustsUniversity fundsNominee companiesTrusteesPower of attorney holders..,.
Entities/Funds Eligible to get registered as FII7/10/2014pushpa's team11Eligibility criteria for applicantIn India it started from September 1992 . In order to trade in Indian equity market needed to register with SEBI as FII.
As per rules & regulations of SEBI eligibility criteria for applicant are as follows: Applicant must be fit & proper.Payment of registration fee of US $.5000.00.Applicant should have track record , experience, financial knowledge, professional competence, general reputation of fairness & integrity.Applicant should have permission under FEMA ACT - 1999 Provisions from RBI.Applicant must appoint a local custodian & enter into contract with him , also appoint a designated bank to route its transactions.
7/10/2014pushpa's team12Pros & cons of FIIAdvantages :
Improve corporate capital structuresProvide financial innovationEnhance competition & efficiency of financial mrktsHelps in economic developmentImprove corporate governance
It is in the form of equities & are S.T. in natureCreates prblm of inflationFluctuations in FII have impact on stock exchangeProblematic for small investorsFalse representation of economyIt is of S.T. investment.
7/10/2014pushpa's team13Differentiating FDI & FII."In order to remove the ambiguity that prevails on what is Foreign Direct Investment (FDI) and what is Foreign Institutional Investment (FII), it is proposed to follow the international practice and lay down a broad principle that, where an investor has a stake of 10 percent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 percent, it will be treated as FDI. A committee will be constituted to examine the application of the principle and to work out the details expeditiously."7/10/2014pushpa's team14
Business is more exciting than any game.Corporation is an ingenious device for obtaining individual profit without individual responsibility.7/10/2014pushpa's team15