The route was earlier restricted to knowledge base sectors like information technology (IT), pharma, bio technology etc.

As per the new guidelines issued by the Reserve Bank of India, an Indian party can acquire shares in any foreign company pertaining to any industry in accordance with the scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares through deposit receipt mechanism.

However, the acquisition of foreign shares has been capped at $100 million or an amount equivalent to 10 times the export earnings of the Indian party during the preceding financial year, whichever is higher.

It has also been specified that the total holding in the Indian party by non-resident Indians, post issue of new ADR/GDR issue, should not exceed the sectoral cap of $100 million. Further ADR/GDR issued for the purpose should be backed by underlying fresh equity shares issued by the Indian party.

While ADR/GDR used for acquiring foreign shares should be listed on any stock exchange outside India, for shares not listed in any stock exchange, valuation will be done as per the recommendations of the investment banker.

Besides, the valuation can also be based on the current market capitalisation of the foreign company arrived at on the basis of monthly average price on any stock exchange for three months preceeding the month of acquisition.

Meanwhile, partnership firms engaged in the business of chartered accountancy, legal practice, information technology and entertainment software related services and medical and healthcare services can invest up to $1 million or its equivalent in one financial year under the automatic route.

However, the Indian party needs to inform the details of the investment to the RBI within 30 days of making such investment. Besides, the proceeds from purchase of shares should not exceed $20,000 or its equivalent in any one calender year.Earlier, overseas investments by registered partnership firms were banned.

In a bid to encourage individual foreign investment, the cap on investments by Indian companies out of their Esop proceeds has been increased from $10,000 in a block of five years to $20,000 per annum.