INTERNATIONAL FINANCIAL INVESTMENT STRATEGIES AND REGULATIONS FOR INDIAN COMPANIES

P.C.T.E) 

PRESENTED By:

International Financial Investment Strategies  

These are strategies that helps & supports the corporations in creating decisions at the same time helping governments to enhance their appeal for capital investments These strategies may concern different factors that include competitive assessments, market analysis, investment climate analysis, marketing and branding analysis, qualitative factor analysis.

Criteria For International Investors 
      

Size of internal market Freedom of Access to the market Labour Force and raw material Protection from currency devaluation Regulatory Burdens Political Risk Factor Export Potential Tax Incentives

Types Of Foreign Investments

Portfolio Investments  



The U.S. government defines portfolio investment as stock purchases that involve less than 10 per cent of the voting stock of a corporation. Portfolio or financial investments take place primarily through financial institutions such as banks and investment funds. Portfolio Investments: purely financial assets, such as stocks and bonds, denominated in a national currency.

Stocks and Bonds  

With bonds, the investor simply lends capital to get fixed payouts or a return at regular intervals and then receives the face value of the bond at a pre-specified date. preWith stocks the investor purchases equity, or a claim on the net worth of the firm.

Motives for International Portfolio Investments 
 

Earn higher returns abroad. Residents of one country purchase bonds of another country if the rates of return on the bonds are higher in the other country. Residents of one country purchase stock in a corporation in another country if they expect the future profitability of the foreign corporation to be higher than the domestic corporations.

Risks Associated With Investments 
 

Investors are interested not only in the rate of return but also in the risk associated with a particular investment. The risks with bonds consist of bankruptcy and the variability in their market value. Investors maximize returns for a given level of risk and generally accept a higher risk only if returns are higher.

Foreign Direct Investments  



FDI or Foreign Direct Investment is any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor. It require a business relationship between a parent company and its foreign subsidiary. For an investment to be regarded as an FDI, the parent firm needs to have at least 10% of the ordinary shares of its foreign affiliates.

Motives for Foreign Direct Investments
Earn higher returns from ± higher growth rates abroad ± more favorable tax treatment ± greater availability of infrastructures  Diversify risks.  Firms with a stronger international orientation, either through exports and/or through foreign production sales facilities, are more profitable and have a much smaller variability in profits that pure domestic firms.  Source of cheaper raw materials. 

Motives for Foreign Direct Investments 
  

Avoid tariffs and other restrictions that nations impose Take advantage of various government subsidies to encourage direct foreign investments. Enter a foreign oligopolistic market so as to share in the profits Purchase a promising foreign firm to avoid future competition and the possible loss of exports market

Foreign Institutional Investments 


FII is the investment made by Foreign mutual funds in the Indian market An institution established outside India, which invests in securities traded on the markets in India egeg-Pension Funds -Mutual Funds -Insurance companies

Indian Companies 

Indian companies are generally allowed to raise equity capital through issue of ADR/GDR in case of Portfolio Management . What are ADR / GDR ? - American Depository Receipts - Global Depository Receipts 

Regulations relating to issue of ADR/GDR 
  

Indian companies registered through ADR/GDR would be free to access ADR/GDR markets through automatic route Automatic route will cover issue of employee option stock by IT Companies Approvals frm RBI like as under companies act , overseas act would have to be obtained . Issue related expenses subjected to ceiling of 4% in case of GDR and 7% in case of ADR .

Cont .. 

After completion of all such transactions the companies would require to furnish all the details to RBI within 30 days of completion of such transactions

Various methods of Investing abroad 

Joint venture Mergers & Acquisitions / Cross Border Acquisitions Licensing Franchising   

Top acquisitions made by Indian companies worldwide:
Acquirer Targeted Company Country Targeted

Tata Steel Hindalco Videocon Dr. Dr. Reddy¶s Labs Suzlon Energy HPCL Ranbaxy Labs Tata Steel Videocon VSNL

Corus Group plc Novelis Daewoo Electronics Corp. Corp. Betapharm Hansen Group Kenya Petroleum Refinery Ltd. Ltd. Terapia SA Natsteel Thomson SA Teleglobe

UK Canada Korea Germany Belgium Kenya Romania Singapore France Canada

Foreign Exchange Management Act , 1999 

Foreign Exchange transactions were earlier regulated in India by the Foreign Exchange Regulation Act, 1973. Extent and Application of FEMA:  Whole of india  All the branches, offices and agencies outside India owned and controlled by PRI

Cont««. 


FEMA replaced FERA in 1999. Came into effect from Jan 1, 2000. Objectives :  Consolidate and amend the law relating to foreign exchange  Facilitating external trade and payments  Promoting the orderly development and maintenance of foreign exchange market in India

Restrictions on dealing in Foreign Exchange and Foreign Securities
Restriction on dealing  Restriction on payments  Restriction on receipts  Acquisition etc. of assets outside India  Relaxation in restrictions 

Securities and Exchange Board of India Act ,1992
Objects of the SEBI Act  Protection of the interests of the investors  Promoting orderly and healthy growth of the securities market  Regulating and developing a code of conduct and fair practices by intermediaries.  Monitoring the activities of stock exchange, mutual funds and merchant bankers etc.

POWERS OF SEBI
Grounds for ordering investigation  Duties of directors, officers and employees  Powers of the investigating authority a) power to retain books etc. b) power to examine on oath c) power to take notes on examination  Seizure of documents by the investigating authority 

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