Fdi in equity & ecb

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Vinay B L (Querist)
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11 February 2013 Dear Members,

Can anyone provide me the comparative analysis between FDI in Equity and ECB for a company which is engaged in Real estate activity. As per my analysis and understanding, Equity is a better option the ECB, since,
In case of FDI in equity, the Company need not pay the dividend in case there is no profit whereas the Company should pay the interest as agreed in case of ECB irrespective of the fact that the Company has earned the profits or not
The Company can use the funds for any purpose in case of FDI in equity, whereas the Company can use the funds only for the purpose of capital expenditure
In case of FDI in equity, the company can retain the funds for a longer period whereas, the Company should repay the debts either in 3 or 5 years as the case may be.
Request you to express your opinion on the above said subject and correct me if I am wrong.

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Thanks and Regards
Vinay B L

Nikhil Kaushik

Nikhil Kaushik (Expert)
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11 February 2013 Dear Vinay,

If I am not mistaken, ECB is not PERMITTED for real estate sector!

So to that extent your analysis becomes redundant.

Please refer https://rbidocs.rbi.org.in/rdocs/notification/PDFs/12EC010712EF.pdf Page 10.

Vinay B L

Vinay B L (Querist)
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12 February 2013 Dear Mr. Nikhil,

Thank you for the reply. As per my knowledge FDI in real estate is not permitted except TOWNSHIPS, which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure.

Further 100% FDI is allowed in Townships, that too under automatic route. Therefore I hope that my analysis is not redundant. Pl correct me if I am wrong

Regards
Vinay B L

Nikhil Kaushik

Nikhil Kaushik (Expert)
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12 February 2013 Vinay,

Kindly read my reply! I mentioned that ECB is not allowed in real estate!

So one limb of your analysis doeesn't exist. Your analysis is about ECB V/s FDI in real estate. Since ECB is not permitted for real estate as an End-Use, the analysis do become redundant.

Otherwise, for any other permissible end use, you are spot on regarding the benefits of FDI vs ECB except that in FDI you have to dilute the ownership.

Vinay B L

Vinay B L (Querist)
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12 February 2013 Thank you Mr. Nikhil.

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