What are the permissible sources for funding overseas direct investment?

A. Funding for overseas direct investment can be made by one or more of the following sources:

1.   The balances held in Exchange Earners Foreign Currency account of the Indian Party maintained with an authorised dealer;

2.   Proceeds of ADR/GDR issues;

3.   Market purchases of foreign exchange;

4.   Share swap (refers to the acquisition of the shares of an overseas entity by way of exchange of the shares of the Indian entity);

5.   Capitalisation of exports, royalties, etc.;

6.   Proceeds of ECBs/FCCBs raised abroad.

For the purpose of reckoning net worth of an Indian party, the net worth of its holding company (which holds at least 51% stake in the Indian Party) or its subsidiary company (in which the Indian party holds at least 51% stake) may be taken into account to the extent not availed of by the holding company or the subsidiary independently and has furnished a letter of disclaimer in favour of the Indian Party. However, this facility is not available to partnership firms. Also the partnership firm’s networth can not be taken into account by an incorporated entity.