FDI Modes / Instruments

  • Equity Shares
  • Compulsorily Convertible instruments
  • Depository Receipts

Equity Shares
An equity share, also referred to as ordinary share, represents the form of ownership in which a shareholder undertakes the maximum entrepreneurial risk associated with a business venture. The holders of such shares are members of the company and possess voting rights.
Compulsorily Convertible Instruments

A person resident outside India can purchase compulsorily convertible preference shares or compulsorily convertible debentures (treated on par with equity instruments for the purpose of FDI norms) issued by an Indian company under the FDI policy and the Indian company is allowed to receive the amount of consideration in advance towards issue of such equity instruments, subject to certain terms and conditions.

Depository Receipts
Qualifying Indian companies are permitted to raise equity capital overseas through this method. Generally, issue of ADRs / GDRs is under automatic route (to the extent of permissible FDI under automatic route) not requiring any permission under FDI norms. Where the issue of ADRs, GDRs by a company is likely to increase the permissible investment limits of FDI under the automatic route, or where such an investment is made in the form of a project that requires government approval, the company must seek the approval of the Foreign Investment Promotion Board (FIPB), Government of India.