The government has rushed in to amend FDI policy to monitor and check investments into Indian companies from neighbouring countries after it was revealed that China’s central bank has raised equity stake in HDFC above 1%
The government has rushed in to amend foreign direct investment (FDI) policy to monitor and check investments into Indian companies from neighbouring countries after it was revealed that China’s central bank has raised equity stake in HDFC above 1 per cent. The Department of Promotion of Industry and Internal Trade (DPIIT) has amended the FDI policy to curb the opportunistic takeovers and acquisitions of Indian companies amid ongoing coronavirus (COVID-19) pandemic. Last week, HDFC (Housing Development Finance Corporation) revealed a surprise shareholder, the People’s Bank of China (PBOC), in a disclosure to the stock exchanges. According to the data provided by India’s largest financier, China’s central bank held 1.75 crore shares of the company at the end of March 2020. At current prices, the value of PBOC’s holding in HDFC is close to Rs 3,000 crore.
“The amendment aims at curbing opportunistic takeovers or acquisitions of Indian companies pursuant to COVID-19 including China,” Karan Mitroo, Partner, L&L told Financial Express Online. “This move is consistent with moves of several other countries to avoid distressed buyouts of companies which have become vulnerable on account of COVID-19,” he added.
DPIIT issued a notification on Saturday saying that all foreign direct investment into India from countries sharing land border with India will be allowed only under the government approval route. “A non-resident entity can invest in India, subject to the FDI policy except in those sectors/activities which are prohibited,” the notification read. Further, the notification said that the people or entities of Pakistan will now be allowed to invest in Indian companies, only under the government route and will not be allowed to invest in defence, space, atomic energy and other prohibited sectors. Also, the restrictions announced today will apply to the existing or future FDI transfer to India’s neighbouring countries.