RBI/2004-05/1 Master Circular No. /1 /2004-05, DT. 01/07/2004

Master Circular - Direct Investment by Residents in Joint Venture (JV)/Wholly Owned Subsidiary(WOS) abroad (Part - II)

DECLARATION

It is certified that the information furnished above is true and correct. It is further certified that all the legal and other regulatory requirements in India and the host country of acquisition have been complied with.

Place _____________	________________________ (Signature of authorised official)
Date _____________ Stamp & Seal	Name : _____________________ Designation : _____________________
Encls : 1.	4.
2.	5.
3.	6.

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Instructions for filling up the form ODG

(This may be detached and retained by the Indian company)

1. ODG form complete in all respects should be submitted in triplicate to the Chief General Manager, Foreign Exchange Department, Reserve Bank of India, Central Office, Overseas Investment Division, Amar Building, Mumbai 400 001.

2. The following documents should be enclosed to this form :-

(A) A statement from the Statutory Auditors of the Indian company certifying that

(i) the Indian Party has already made an ADR and / or GDR issue and that such ADRs/GDRs are currently listed on any stock exchange outside India;

)such investment by the Indian Party does not exceed the higher of the following amounts, namely:

iii. amount equivalent of US$ 100 mn. or

iv. amount equivalent to 10 times the export earnings of the Indian Party during the preceding financial year as reflected in its audited balance-sheet, inclusive of all investments made under Regulations in Part I, including under (i) of this clause, in the same financial year,

(ii) the issued amount of the ADRs/GDRs exchanged for acquiring shares of the overseas (acquired) company is within the limit specified in the Foreign Exchange Management.(Transfer and Issue of Foreign Security) Regulations,2000

(iii) the ADRs and/or GDRs issued for the purpose of acquisitions are backed by underlying fresh equity shares of the Indian party;

(iv) after the new ADR and/or GDR issue, the total holding in the Indian party by persons resident outside India in the expanded capital base, does not exceed the sectoral cap prescribed under the relevant regulations for such investments in the activities in which the Indian party is engaged; and

(v) where the shares of the foreign (acquired) company are not listed in any stock exchange, its valuation for acquisition is in accordance with the recommendations of the Investment Banker

or

where the shares of the foreign (acquired) company is listed on a stock exchange abroad, the valuation of its shares is based on current market capitalisation of the acquired company arrived at on the basis of monthly average price on any stock exchange abroad for the 3 months preceding the month in which is the acquisition is committed and over and above, the premium, if any, as recommended by the Investment Banker in its due diligence report.

(B) Copy of the report together with due diligence report, if any, from an Investment Banker in support of the valuation as indicated at above.

(C) Other relevant documents as submitted to the Stock Exchange/Regulatory Authorities in the host country of the company acquired.

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ODI

Application to Reserve Bank of India for Direct Investment in a Joint Venture/ Wholly Owned Subsidiary Abroad

All amounts of foreign currency (FCY) & Indian Rupees (INR) should be in thousands only, i.e., ‘000 should be omitted

For office use only

Date of Receipt ---------------------------
Inward No. ---------------------------

Part A - General

I. Brief Particulars of proposed Investment

(i) Financial commitment (in FCY) -------------------- (ii) Country of location --------------
(iii) Nature of Investment

(A) Investment in a new project (i.e. fresh proposal) OR
(B) Investment in an existing project (i.e supplementary proposal)

Approval/Identification No.

Please indicate 13 digit number issued by RBI

Purpose of Investment		Purpose of Investment
(a) Participant in JV		(a) Enhancement of equity of the existing JV/WOS
(b) Contribution in WOS		(b) Grant of/Enhancement of loan
(c) Full acquisition of a foreign concern		(c) Extension/Enhancement of Guarantee
(d) Partial acquisition of a foreign concern		(d) Others (Please specify)
(e) Others (please specify)

II. Line of Activity of the JV/WOS
(Please tick the relevant box)

(a)	(i) Manufacturing (ii) Trading (iii) Financial (iv) Non Financial Services (v) Others (Please specify)		(b) Brief particulars of products to be manufactured/goods to be traded / services to be rendered ----------------------------------- -----------------------------------

III. Proposed capital structure of the JV/WOS

(a) Indian Party (ies)	% stake in equity	(b) Foreign Partner(s)	% stake in equity
1. -----------------------	----------	1. ------------------------	----------
2. -----------------------	----------	2. ------------------------	----------
3. -----------------------	----------	3. ------------------------	----------

Part –B - Particular of Indian Party(ies) and Foreign Partner(s) indicated at A. III above.

I. Indian Party

(Cases where there are more than one Indian party, information may be given on separate sheets for each of the parties)

(i) Name & Address

(ii) Date of Incorporation _____________

(iii) Date of Commencement of Business _____________

(iv) Status * _____________

(v) Existing Line of Activity ____________

(vi) Years of experience in the line of Activity. ______________

(vii) % of Non-resident interest in the share capital of the Indian Party ______________

* (a) Public Ltd. Company (1), (b)Private Limited Company (2),

(c) Public Sector Undertaking (3), (d) Others (4) (Please specify).

(viii) Financial particulars of the Indian Party for the last 3 years

Accounting year	Domestic sales	Foreign exchange earnings from exports (excluding equity exports to existing JV/WOS)	Foreign exchange earnings other than from exports	Net Profit/(Loss)	Paid up capital	Net worth
(1)	(2)	(3)	(4)	(5)	(6)	(7)
1 2 3

(ix). Particulars of existing Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS) already in operation or under implementation ,of the Indian party and its group concerns and foreign exchange earnings from these concerns :

(Amount in FCY)

Sr.No.	Name of Indian Party	Name of JV/WOS/ Country	Approval No. allotted by Reserve Bank	Amount of investment
				Equity	Loan	Guarantee
(1)	(2)	(3)	(4)	(5)	(6)	(7)
1 2 3 4 5

Total Repatriations (R) vis-à-vis Entitlements (E) (entitlements & repatriations in the last 3 years to be given in brackets)				Total non-equity of export made so far (figures for last three years to be given in brackets)
Dividend		Others		Projected exports	Exports made	Outstanding, if any
(E)	(R)	(E)	(R )
(8)	(9)	(10)	(11)	(12)	(13)	(14)
1. 2. 3. 4. 5.

II. Particulars of the Foreign Partner(s)/concern
(To be filled in case of foreign investment in JVs only. Cases where there are more than one foreign partner, information may be given on separate sheets for each of the collaborators)

(a) Name & Address of the foreign partner/concern: _______________________________________

(b) Date of incorporation

(c) Years of experience in the proposed field of collaboration

(d) Financial particulars of the foreign partner/concern during the last 3 years:

(Amount in FCY)

Accounting Year ending	Sales	Net profits/(loss)	Paid-up Capital	Net worth	Dividend %
(1)	(2)	(3)	(4)	(5)	(6)
__________	___________	_________	________	_________	_________
__________	___________	_________	________	_________	_________
__________	___________	_________	________	_________	_________

Part –C - Performance of the JV/WOS

(To be filled in case of supplementary proposals only)

I. Date of latest Annual Performance Report (APR) submitted to Reserve Bank

II. Date of Incorporation cccccccc D  D M  M  Y Y  Y  Y

cccccccc D  D M  M  Y Y  Y  Y  III. Date of commencement of businesscccccccc D  D M  M  Y Y  Y  Y

IV. Capital structure of the JV/WOS_____________________________________(Amount in FCY)

(a) Indian Equity

Approved amount	% age to total equity	Actual investment	%age to total equity
(i)	(ii)	(iii)	(iv)

(b) Mode of Indian equity investment

(i) Cash Remittance
(ii) Capitalisation of

(a) Exports of plant
& Machinery/goods
(b) Others (Please specify)

(iii) GDR/ADR proceeds
(iv) Swap of shares
(v) Bonus shares
(vi) Out of EEFC balances
(vii) Others (please specify)

Total :

(c) Foreign equity:     i) Amount _________     ii ) % to total equity ___________

V. (a) Position of Term Loan (TL) /Working Capital (WC) Loan availed of by JV/WOS

(Amount in FCY)

	Amount approved		Outstanding amount		Overdue amount , if any
	TL	WC	TL	WC	TL	WC	Total TL + WC
(i)From Indian Party (ii)From foreign partner (iii)From Indian banks/ financial institutions (iv) Others (Please specify)
Total:

(b) Position of guarantees extended to JV/WOS               (Amount in FCY)

	Amount of guarantee approved/extended	Amount invoked/claimed (if any)	Date of Invocation	Amount paid so far
(i) By Indian Party (ii)By foreign party (iii)By banks /financial institutions in India (iv) By banks /financial institutions outside India (v) Others (Please specify)

VI. Operational details of the JV/WOS for the last three years          (Amount in FCY)

(i) Gross Sales/Turnover (ii) Net Profit/(Loss) (iii) Dividend (iv) Net Worth	(Year ended) (1)	(Year ended) (2)	(Year ended) (3)

VII. Entitlements(E) and Repatriation ( R) from the JV/WOS

(i) Dividend (ii) Others* (Please specify) (iii) Non equity exports realised (iv) FDI Inflows * ( Royalties, technical know-how fees, consultancy fees, etc.)

(During the last year ended)

( Since commencement of business)

( Total outstanding entitlement due for repatriation)

VIII. Present proposal in brief with supporting reasons:

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
____________________________________________________________

Part-D- Financial Package of JV/WOS

(If the project is to be implemented in phases, separate sheets showing phase-wise distribution of cost should be attached and only the total of all the phases should be indicated below)

I. Rate of exchange applied for the projections.

1 US $      = INR ________
FCY ______ _Units = US $ ________

II. Estimated cost of the project *           (Amount in FCY)

(i) Cost of capital equipment
(ii) Cost of land
(iii) Cost of civil works
(iv) Cost of misc. fixed assets
(v) Preliminary & preoperative expenses
(vi) Contingencies
(vii) Others (Please specify)

Total :

* In case of supplementary proposals, the revised cost of the project may be indicated
III. Financing of the estimated project cost:

	Equity		Term loan(TL)/Working Capital (WC)			Guarantee
	Amount of total quity	% age to Equity	Amount	Period	Rate of Interest	Amount	Period
(A) By Indian Party(ies) (i) (ii) (iii) SubTotal :
(B) By Foreign Partners (i) (ii) (iii) Sub Total C) By Banks/ FIs/others i) ii) iii) Sub Total
Total of A to C

(Equity share capital plus term loan above should be equal to the total cost of the project as at II above.)

IV Method of Investment

(Amount in FCY)

(a) By the Indian party

(i) Cash remittance
(ii) Capitalisation of

(A) Export of plant & machinery/goods
(B) Others (Please specify)

(iii) ADRs/GDRs raised abroad
(iv) Swap of shares
(v) Others( Please specify)
Total

(b) By the foreign partner

(i) Cash
(ii) Fixed assets
(iii) Loans
(iv) Others (Please specify)

Total

(c) Funding of Indian investment

(i) Self-generated funds
(ii) Assistance under Overseas
Investment Finance Scheme of
the EXIM Bank, if applicable

(iii) Resources raised through ADRs/ GDRs
(iv) Loans from banks/financial institutions
(v) Out of balance in EEFC Account
(vi) Swap of shares
(vii) Others (Please specify)

Total

V. Management of the foreign concern. (Whether the Indian party will have management control? If yes, give brief particulars of management/managerial functions to be discharged by the Indian party).

PART - E-Financial projections of the fresh/ revised financial projections in case of supplementary investment proposals

I. Profitability Projections:

(Amount in FCY)         

            Years of operation

	1	2	3	4	5
(a) Gross sales/turnover (b) Operating cost excluding depreciation and interest (c) Depreciation (d) Interest (i) On term loans (ii) On Working Capital loans (e) Tax (f) Net Profit)/(Loss) (g) Dividend (h) Transfer to reserves (i) Accumulated reserves & surplus /(loss) (j) Net-worth

II. Repatriable entitlements of Indian Party, net of host country tax, during the next 5 years of operation

(Amount in FCY)          

            Years of operation

	1	2	3	4	5	Total
(a) Dividend (b) Technical knowhow fees (c) Royalty (d) Engineering/ Technical services fees (e) Consultancy/ Management fees (f) Selling agency commission (g) Others (Please specify ) Total

III. Projected for non equity/incremental exports

(Amount in INR)          

             Years of operation

	1	2	3	4	5	Total
FOB Value

IV. (a) Whether the applicant party/ies, its promoters, directors, etc. have come under investigations by Enforcement Directorate. If yes, the brief details thereof including present stage of investigation/adjudication/manner of disposal of the case should be furnished.

(b) Whether the promoter Indian party/ies is/are presently on the Exporters’ Caution -list of RBI for non-realisation of export proceeds. If so, the present position may be indicated.

V. Any other information relevant to this proposal, including any special benefits/incentives available in the host country for setting up/acquiring the proposed concern:

VI. Name and address, telephone, telex and fax numbers of the branch of the authorised dealer through whom remittance towards the investment will be made.

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
[ DECLARATION ]

I/We hereby certify that the information furnished above are true and correct.

Place Date: List of enclosures :	Stamp /Seal	__________________________ (Signature of authorised official) Name:…………………………… Designation:……………………..
1.		4.
2.		5.
3.		6.

ANNEXURE

Instructions for filling up the Form ODI

(This part should be detached and retained by the applicant)

(1) Application complete in all respects should be submitted in three sets together with the following documents to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Central Office, Overseas Investment Division (OID), Amar Building, Mumbai - 400 001 :

(a) Draft Joint Venture Agreement (or Memorandum & Articles of Association in the case of a Wholly Owned Subsidiary) specifying the equity structure, management, rights and responsibilities of shareholders and also draft agreement(s) for supply of technical knowhow, management and other services, if applicable.

(b) A detailed project/feasibility report incorporating, inter alia, projected funds flow statement and balance sheets for five years, the information on various leverage and profitability ratios like debt-equity ratio, debt service coverage ratio, return on investments, etc. of the foreign concern accompanied by the statement from a Chartered Accountant certifying the ratios and projections, given in the application/report.

(d) A report from the bankers of the Indian party in sealed/closed cover.

(e) The latest Annual Accounts, i.e. Balance Sheet and Profit and Loss Account along with the Directors’ Report of the Indian party and of the foreign collaborator in case of a joint venture.

(f) Additional documents as under, if the application is made for partial/full take over of an existing foreign concern :-

(i) A copy of the certificate of incorporation of the foreign concern;

(ii) Latest Annual Accounts, i.e. the Balance Sheet and Profit and Loss Account along with Directors’ report of the foreign concern ; and

(iii) A copy of the share valuation certificate from

(i) where the investment is more than US $ 5 (five) million, by a Category I Merchant Banker registered with SEBI or an Investment Banker/Merchant Banker registered with the appropriate regulatory authority in the host country; and

(ii) in all other cases, by a Chartered Accountant or a Certified Public Accountant

(g) A report from the bankers of the Indian party in sealed/closed cover.

(h) The latest Annual Accounts, i.e. Balance Sheet and Profit and Loss Account along with the Directors’ Report of the Indian party and of the foreign collaborator in case of a joint venture.

(f) A copy of the resolution of the Board of Directors of the Indian party/(ies) approving the proposed investment.

(g) Where investment is in the financial services sector, a certificate from a Chartered Accountant/Auditor's firm to the effect that the Indian Party :

(i) has earned a net profit during the preceding three years from the financial services activity;

(ii) is registered with the appropriate regulatory authorities;

(iii) has a minimum net-worth (paid-up capital and free reserves) of not less than Rs.15 crores as on the date of last audited balance sheet; and

(iv) has fulfilled the prudential norms relating to capital adequacy as prescribed by the concerned regulatory authority in India.

2. Where there are more than one Indian promoter of the JV/WOS, only one application should be submitted on behalf of all the promoters.

3 (a) In case an Indian party is seeking approval for acquisition of overseas concern through bidding/tender procedure (with/without remittance of any earnest money deposit (EMD)/issue of bid bond guarantee), Indian Party should approach the Reserve Bank atleast one month in advance from the last date for submission of bid to the overseas authority with the following documents :

(i) application in form ODI, to the extent applicable;

(ii) certified relevant extracts of the terms and conditions of bid;

(iii) Chartered Accountant’s certificate indicating the valuation of shares and assets of the overseas concern justifying the acquisition price, where applicable; and

(iv) a project/feasibility report.

(b). In the case where the bid is won by the Indian Party but the terms and conditions of the acquisition are different from those furnished earlier to the Reserve Bank, the Indian Party should apply afresh to the Reserve Bank in form ODI for prior approval before putting through the transaction.

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