India plans stricter rules for companies with foreign ownership, sources say
NEW DELHI: India is planning to tighten foreign ownership rules, two sources said, in a move that may have significant implications for businesses ranging from e-commerce to pharmaceuticals.
The changes would redefine how India views foreign-owned companies, whether directly or indirectly, making them subject to foreign direct investment (FDI) regulations when it comes to share transfers or restructurings.
The discussions are close to being finalised, the sources, both government officials said. They declined to be identified as the discussion was not public.
The Finance Ministry and the Reserve Bank of India, which issues the final rules, did not respond to requests for comment.
India is reviewing its foreign investment laws to simplify them and plug any loopholes.
New Delhi plans to create a new category of 'foreign-owned and controlled entities' (FOCE), which will also include Indian firms with 'indirect foreign investment', the first source said.
Indian boycott of Turkish coffee, chocolates and fashion grows
'What cannot be done directly should not be allowed indirectly either. That will now be clearly reflected in the rules,' the source said.
'Even a domestic restructuring or internal transfer could trigger FDI obligations for foreign-owned firms if the rule change is implemented,' the source said.
An FOCE will be defined as an Indian company or investment fund that is controlled by persons resident outside India. As well as covering indirect ownership, it will also make directly owned foreign firms subject to FDI rules when it comes to changes in structure or ownership.
In particular, any transfer of the indirect shareholding will need to be reported and will have to comply with sectoral foreign investment caps.
These transactions will also be subject to rules stating they be made at fair market value.
The proposed revision in the rules aims to ensure foreign investors cannot bypass the intent of India's FDI policy, sources said.
The central bank is in agreement on the matter, the second official said.
Since 2020, India has required prior government approval for investments from nations sharing its land borders, including China, after clashes between the two neighbours in the remote Himalayan border.
The new FOCE definition will make it harder for Chinese or other foreign investors to use indirect structures such as offshore investment funds or layered Indian entities to enter regulated sectors through the back door, the second source said.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
3 hours ago
- Business Recorder
Late profit-taking wipes out intra-day gains at KSE-100 Index
The Pakistan Stock Exchange (PSX) saw volatile trading on Thursday, with its benchmark KSE-100 Index swaying in both directions before closing the day lower by 260 points. The KSE-100 starting the session positive, hitting an intra-day high of 126,718.28. However, the index witnessed selling pressure in the second half, which pushed it to the negative territory. At close, the benchmark index settled at 124,093.12, down by 259.56 points or 0.21%. 'The Pakistan stock market ended the session on a negative note, weighed down by cautious investor sentiment and profit-taking activity. The benchmark index moved within range, recording an intraday high of 2,365 points and a low of 501 points, before closing at 124,093 — down 260 points or 0.21%,' brokerage house Topline Securities said in its post-market report. Downward pressure was largely attributed to declines in ENGROH, FFC, PPL, OGDC, and BAFL, which collectively eroded 401 points from the index. In contrast, support came from PKGP, UBL, BAHL, LUCK, and DGKC, which together added 347 points, Topline said. Addressing the post-budget conference, Finance Minister Muhammad Aurangzeb on Wednesday warned that additional revenue measures of up to Rs500 billion would be taken next fiscal year, if enabling amendments and legislation on enforcement were not passed by parliament, adding that all the budget figures were locked with the International Monetary Fund (IMF). Aurangzeb presented the federal budget 2025-26 to the parliament on Tuesday, with a total outlay of Rs17.573 trillion, targeting a GDP growth rate of 4.2% against 2.7 per cent in the outgoing year. On Wednesday, the PSX extended its rally as key indices posted strong gains, fueled by robust investor participation and improved sentiment following the positive announcements in the federal budget. The benchmark KSE-100 Index rose by 2,328 points, or 1.91%, to close at 124,352.68 points, up from 122,024.44 points in the previous session. Internationally, global stocks and the dollar slipped on Thursday as investors assessed a benign U.S. inflation report and the fragile trade truce between Washington and Beijing, while rising tensions in the Middle East and lingering tariff anxiety dampened risk sentiment. Attention in financial markets this week has been focused on the US-China trade talks, which culminated in a framework agreement that would remove Chinese export restrictions on rare earth minerals and allow Chinese students to access US universities. MSCI's broadest index of Asia-Pacific shares outside Japan was 0.3% lower in early trading after hitting a three-year high on Wednesday. Japan's Nikkei slipped 0.7%, while U.S. and European stock futures fell. China's blue-chip stock index fell 0.37%, moving off the near three-week top it touched in the previous session. Hong Kong's Hang Seng index was down 0.74%, also inching away from Wednesday's three-month high. Trump's erratic tariff policies have roiled global markets this year, prompting hordes of investors to exit US assets, especially the dollar, as they worried about rising prices and slowing economic growth. Meanwhile, the Pakistani rupee weakened against the US dollar, depreciating 0.07% on Thursday. At close, the local currency settled at 282.67, a loss of Re0.2 against the greenback. Volume on the all-share index decreased to 1,024.63 million from 1,041.13 million recorded in the previous close. The value of shares rose to Rs50.54 billion from Rs46.71 billion in the previous session. Sui South Gas was the volume leader with 55.90 million shares, followed by Fauji Cement with 50.60 million shares, and WorldCall Telecom with 49.33 million shares. Shares of 474 companies were traded on Thursday, of which 170 registered an increase, 270 recorded a fall, while 34 remained unchanged.
Business Recorder
5 hours ago
- Business Recorder
Late profit-taking wipes out gains at PSX
Pakistan Stock Exchange (PSX) saw continuous fluctuations on Thursday as the benchmark KSE-100 index ended with a loss of over 250 points after experiencing some volatility. The index began the day on a positive note, reaching its intra-day high of 126,718.28. However, in the latter part of the session, bears took over, dragging it to an intra-day low of 123,846.55. At close, the benchmark index settled at 124,093.12 level, a decrease of 259.56 points or 0.21%. Addressing the post-budget conference, Finance Minister Muhammad Aurangzeb on Wednesday warned that additional revenue measures of up to Rs500 billion would be taken next fiscal year, if enabling amendments and legislation on enforcement were not passed by parliament, adding that all the budget figures were locked with the International Monetary Fund (IMF). Aurangzeb presented the federal budget 2025-26 to the parliament on Tuesday, with a total outlay of Rs17.573 trillion, targeting a GDP growth rate of 4.2% against 2.7 per cent in the outgoing year. On Wednesday, the PSX extended its rally as key indices posted strong gains, fueled by robust investor participation and improved sentiment following the positive announcements in the federal budget. The benchmark KSE-100 Index rose by 2,328 points, or 1.91%, to close at 124,352.68 points, up from 122,024.44 points in the previous session. Internationally, global stocks and the dollar slipped on Thursday as investors assessed a benign U.S. inflation report and the fragile trade truce between Washington and Beijing, while rising tensions in the Middle East and lingering tariff anxiety dampened risk sentiment. Attention in financial markets this week has been focused on the US-China trade talks, which culminated in a framework agreement that would remove Chinese export restrictions on rare earth minerals and allow Chinese students to access US universities. MSCI's broadest index of Asia-Pacific shares outside Japan was 0.3% lower in early trading after hitting a three-year high on Wednesday. Japan's Nikkei slipped 0.7%, while U.S. and European stock futures fell. China's blue-chip stock index fell 0.37%, moving off the near three-week top it touched in the previous session. Hong Kong's Hang Seng index was down 0.74%, also inching away from Wednesday's three-month high. Trump's erratic tariff policies have roiled global markets this year, prompting hordes of investors to exit US assets, especially the dollar, as they worried about rising prices and slowing economic growth.
Business Recorder
6 hours ago
- Business Recorder
Indian rupee ends a tad lower, hurt by corporate dollar bids, outflows
MUMBAI: The Indian rupee weakened slightly on Thursday, pressured by corporate dollar demand and likely portfolio outflows even as broad-based dollar weakness boosted its regional peers. The rupee closed at 85.60 against the U.S. dollar, down 0.1% from its close at 85.51 in the previous session. Asian currencies rose with the Taiwanese dollar leading gains with a 1.6% rise while the offshore Chinese yuan rose 0.2%. The dollar index, meanwhile, fell 0.4% to 98, its lowest level in over a month. The rupee was unable to benefit from a broadly weaker dollar in the face of dollar bids from local companies and foreign banks, likely on behalf of custodial clients, traders said. The local currency has been a laggard among its regional peers over 2025 as well, with analysts citing India's external investment deficit among the hurdles that have held it back. On the day, India's benchmark equity indexes, the BSE Sensex and Nifty 50, fell about 1% each on the day, as ambiguity over the U.S-China trade deal and rising Middle East tensions dampened risk appetite. Indian rupee set for calm open amid yuan watch, two-sided flows Crude oil prices pulled back on the day after rising over 4% in the previous session in light of Iran's threat to strike U.S. bases in the Middle East region if nuclear talks fail. 'Higher oil prices are a dollar positive by way of the U.S. comparative advantage in energy independence,' ING Bank said in a note. 'Any further developments here could see the dollar favoured for its liquidity – although the yen and Swiss franc would be in demand too,' ING said. Dollar-rupee forward premiums, meanwhile, ticked up on the back of a rise in bets on a rate cut by the U.S. Federal Reserve in September after data released on Wednesday showed that U.S. consumer prices rose less-than-expected in May.
