Joint Venture
With an Indian partner
A very common method used by foreign companies entering the Indian market is to work on a joint venture with an Indian company. In the days of the past, only selective foreign investment was invited. There was also a cap on the percentage holding the foreign company could have. In recent years, this has been opened up substantially, and wholly owned foreign subsidiaries are also being allowed liberally. It is possible to start such a joint venture either with an existing company or to start it anew with an Indian partner. In either case, the Indian company needs to exist. This company is the one that will approach the Foreign Investment Promotion board (FIPB) or the Reserve bank of India (RBI) with a request for allowing foreign investment in the company. The application should state the purpose of the company and why it is seeking foreign investment. It should also specify the extent of investment required, both in terms of percentage of holding as well as in terms of absolute figures. It is also useful to highlight any export earning or saving of imports as a result of the formation of this joint venture. The process of getting the formal approval takes up to 6 to 8 weeks after submission of the application to FIPB.
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