Centre Tweaks FDI Policy To Protect Companies From Hostile Takeovers Amid Covid-19 Crisis

The Centre on Saturday tightened norms for Foreign Direct Investment in India with a view of "curbing opportunistic opportunistic takeovers or acquisitions of Indian companies due to the Covid-19 pandemic." The new policy mandates that companies located in countries that share a border with India will have to approach the government for investing in India, instead of taking the automatic route.

"A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited," the department said. "However, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route," the Ministry of Commerce and Industry said in a press release issued on April 18

The ministry further added that a citizen of Pakistan or an entity incorporated in Pakistan can invest only through the government route in activities other than defence, space, atomic energy and other sectors prohibited for foreign investment.

The existing FDI policy as applicable to investments from India's neighbourhood, was confined to Bangladesh and Pakistan, while the new policy brings China, Nepal, Bhutan and Myanmar within its ambit.

There has been growing concern across the world that Chinese companies are buying cheap, distressed assets that have been battered in wake of the Covid-19 pandemic. Countries such as Australia and Germany have reportedly tightened their foreign direct investment policies in recent weeks to protect their companies from falling into foreign, aka Chinese hands.