Under the Automatic Route, an Indian Party does not require
any prior approval from the Reserve
Bank of India
for setting up a JV/WOS abroad (except in case of investment
in the financial sector, where, prior approval is required from the concerned
regulatory authority both in India and abroad). The criteria/conditions
for direct investment under the Automatic Route are :-
- The total 'financial commitment' of the Indian Party
in JVs/WOSs in any country other than Nepal, Bhutan and Pakistan should
be upto 100% of its net worth and the investment should be in a lawful
activity permitted by the host country. Thus,the net worth is the
overall ceiling for overseas direct investment and any fresh overseas
investment can be made only on the basis of accretion to the net worth.
- The Indian Party should not be on the Reserve Bank's
exporters caution list / list of defaulters to the banking system
published/ circulated by the Credit
Information Bureau of India Ltd (CIBIL)/ Reserve
Bank of India or under investigation by the Enforcement
Directorate or any investigative agency or regulatory authority.
- The Indian Party should route all the transactions
relating to the investment in a JV/WOS through only one branch of
an authorised dealer to be designated by it.
- In case of partial or full acquisition of an existing
foreign company, where the investment is more than USD 5.00 million,
valuation of the shares of the company shall be made by a Category
I Merchant Banker registered with SEBI
(Securities and Exchange Board of India) or an investment Banker
or Merchant Banker outside India registered with the appropriate regulatory
authority in the host country. While in all other cases, by a Chartered
Accountant or Certified Public Accountant.
The eligible Indian Party intending to make a direct investment
under the automatic route is required to fill in the Form
ODA supported by documents listed therein, i.e., certified copy of
the Board Resolution, Statutory Auditors certificate, Valuation report
(in case of acquisition of an existing company) as per the valuation norms
and approach an Authorised Dealer (designated
Authorised Dealer) for making the investment/remittance.