Fdi investment ( needs urgent guidance)

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amit jain (Querist)

24 March 2012 Dear All,

One of my clients has formed a pvt ltd company & now they are planning to receive funds from japan against issuance of shares. The Company will manufacture handmade textile products & my question is whether this Sector will fall under SSI Category or not & whether funds can be received under automatic route or Approval Route.

Plz Clarify.

Thanks in Advance
Amit Jain

Ajay Mishra

Ajay Mishra (Expert)

25 March 2012 Hi

I think it will not eligible to issue shares under FDI.

Manufacture of items reserved for production in Micro and Small Enterprises (MSEs)

FDI in MSEs will be subject to the sectoral caps, entry routes and other relevant sectoral regulations. Any industrial undertaking which is not a Micro or Small Scale Enterprise, but manufactures items reserved for the MSE sector would require Government route where foreign investment is more than 24% in the capital. Such an undertaking would also require an Industrial License under the Industries (Development & Regulation) Act 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production and in accordance with the provisions of section 11 of the Industries (Development & Regulation) Act 1951.

Regards

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