Under the Automatic Route
The financial limit for automatic overseas business acquisition, without without reference either to the Government or the RBI, on a back to hack ass, that is, through stock swap stock swap is as follows: (j) US dollar 100 million or (ii) Upton 10 times the export earnings of the indistinguishable investing company during preceding year, as reflected in the audited balance sheet of the company. For category (iii, if any other facility has been availed by he investing company for overseas investment through any other window, including item (j) above, during cloud financial clear, the same could he adjusted and the entitlement would be for the balance amount. The value indicated above above would he the annual limit (financial ear) for each company for one or more acquisitions. Other criteria for qualifying for automatic route would continue to apply.
Indian company would send the proposal to the RBI for consideration by the Special Composite Committee for Overseas Investment through AD AD GR Rock Swap. The criteria for automatic approval and other norms contained in the guidelines, including the mandatory requirement of conforming to the FRI policy, existing AD GR listing abroad and reporting requirement etc, would continue to be operative:’ (1) The existing foreign equity, including on account of any existing ADRIANA offering, and the proposed ADRIANA issue/stock paw in the ‘expanded capital bases is within the limit operative for the Rb Is automatic approval for FRI in the software sector. No PB approval would be required in such cases even if the Ad Rs/Gd Rs are not issued in cash, ‘ (U) The proposed AD/GR stock swap for the purposes of acquisition of a business abroad is by way
The present Adrenal guidelines provides for redemption of the ‘Address/Gd Rs into the underlying rupee denominated shares of the Indian company, sale i.n the domestic market . and full repatriation of sale proceeds, subject to payment of prescribed tax. The same provision oils extend to Adrenal holders of the acquired overcompensation of the underlying shares into Ad Rs/Gd Rs is not permissible. ) he proposal would have to conform to the following valuation norms: (a) The valuation of the transaction and .of the overseas company hold be, as per the recommendation of an investment banker; (b) In the case of a listed overseas company, the valuation should be based n the current market capitalization of the overseas company (based on the monthly average trading on the overseas exchange, for three months preceding the month in which the acquisition would take place) and the premium, if any, as per the recommendations of the vestment banker in the due diligence reports: c) In the case of an unlisted overseas company, the valuation would be based on the – commendations of the investment banker. The proposal should in conformity with all provisions of the Companies Act, 1956. Companies re required to report full details of the transaction. including value of the acquisition cost, foreign equity level in the Indian software company on account Issue-of Ad Rs/GR.~,as detailed below. After completing the transactions/acquisitions, Indian companies hold furnish full par thereof, include amount of Ad Rs/GR.’ issued, percentage of foreign equity level in
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