FDI Full Form | Full Form of FDI (Meaning, Definition)

FDI Full Form

Foreign Direct Investment (FDI) in India is governed by the Foreign Exchange Management Act (FEMA) and the federal government's FDI Policy. Foreign investments enter India through the automatic route (where no government approval is required) or through the government approval route.

FDI Full Form - Foreign Direct Investment

In recent years, foreign investors have attempted to invest in India using a variety of hybrid instruments or Hybrid Securities, that is, financial instruments that combine both debt and equity characteristics.

While investment through Equity Shares is permitted under the FDI regime, preference shares, debentures, loans and bonds are considered debt instruments as they guarantee assured returns to the investor.

In addition, some hybrid instruments, such as Optionally Convertible Preference Shares (OCPS) and optionally convertible debentures (OCDs) are also classified as debt investments.

In 2016, IDBI Trusteeship Services Limited. In the case of Hubtown Limited, the Supreme Court of India decided on the issue of multifamily investment through FDI. It is believed that they were considered as equity instruments until the investors were guaranteed assured returns, and therefore, permitted under the FDI regime.

In the case of CCPS, preference shares are issued, which entitles the holder to a fixed dividend on a priority basis that is essentially convertible into equity after a predetermined period.

The pricing formula is determined at the time of issue, and should not be less than fair value according to current regulations.

CCDs are similar to CCPs, except that debentures are issued instead of preference shares. CCDs should be fully determined and compulsorily converted into equity shares according to the same pricing criteria that apply to CCPS.

Convertible Notes (C-Notes) - Unlike CCP and CCD, C-Notes can only be issued by startup firms. A C-note is issued as a debt instrument at the holder's choice (determined at the time of issuance), or convertible into equity shares within five years, or upon the occurrence of a specified event, or by instrument.

Investment in C-Notes must be made in a single installment for an amount of at least US $ 38,600 (Rs 2.5 million).

In addition, multifamily structures are becoming increasingly popular, especially through the downstream investment route - where an Indian company is owned and controlled by a foreign entity investing in another Indian company.

The trend of using hybrids, such as mezzanine funding, is growing rapidly as more and more investors are beginning to understand the benefits and downside risk protection of hybrid devices. The mezzanine financing gives the lender the right to convert the ownership or equity interest in the company into default, after payment from the lender capital companies and other senior lenders.

Finally, IDBI Trusteeship Services Limited v. The 2016 Supreme Court decision in the case of Hubtown Limited paved the way for innovation in hybrid devices by giving more latitude to multifunctional FDI structures.

Post - NGO Full Form | WIFI Full Form | FDI Full Form