Mumbai: Fearing the Chinese companies’ recent acquisition advancements, India has clamped down on foreign investments to curb opportunistic takeovers of Indian companies, during the Covid-19 pandemic.
Without naming China, The department for Promotion of Industry and Internal Trade in its notification said, “An entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in, or is a citizen of any such country, can invest only under the ‘government route’. In other words, government approval will be required.
The move mandates prior government clearance for all forms of investments, even indirect ones, from all countries sharing land border with the country.
The move may impact investments from countries such as Nepal, Bangladesh, Pakistan, Sri Lanka, Myanmar, and Bhutan and more importantly China.
The latest move is said to be taken after Housing Development Finance Corp. Ltd (HDFC) reported that People’s Bank of China (PBOC) had raised its stake in the home lender from 0.8% to 1.01% in the March quarter through open market purchases.
Congress leader Rahul Gandhi had expressed concerns on the issue through micro blogging website.
“The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The government must not allow foreign interests to take control of any Indian corporate at this time of national crisis,” Gandhi had tweeted.
Hours after the centre’s move, Gandhi expressed his thanks to the government for “taking note” of his “warning” over possible threats to weakened Indian firms amid the pandemic.
I thank the Govt. for taking note of my warning and amending the FDI norms to make it mandatory for Govt. approval in some specific cases. https://t.co/ztehExZXNc
— Rahul Gandhi (@RahulGandhi) April 18, 2020
Foreign investments into India come via FDI and the foreign portfolio investment (FPI) route. While FDI is regulated by the DPIIT under the ministry of finance, FPI comes through the stock market and is regulated by Securities and Exchange Board of India (Sebi).
There are a total of 16 Chinese FPIs registered in India with $1.1 billion invested in top-tier stocks. The exact level of China’s investment through direct and indirect (beneficial ownership) routes is not in public domain. As for fund structures situated elsewhere in the world, Chinese investors could be beneficial owners.