Foreign players in newly liberalized sectors can increase their decision making powers and safeguard their investments through creative strategies, even if they don’t have full control. Nandini Lakshman reports from Mumbai
The issue of control of Indian companies became a hot topic when India’s previous government eased foreign direct investment (FDI) restrictions in a raft of sectors two years ago. The topic got even hotter on 10 July, when India’s new finance minister, Arun Jaitley, announced in his maiden budget speech that the FDI cap in the insurance and defence sectors would be raised to 49% from 26%.
While some foreign investors are willing to capitalize on these new business opportunities, many are put off by the prospect of leaving control in Indian hands.
“The problem is that when you are giving equity partnership without control, you are unnecessarily creating confusion,” says Ramesh Vaidyanathan, the founder and managing partner of Mumbai-based law firm Advaya Legal, which specializes in cross-border investments in aviation and defence. His remedy is simple: “If you can’t control, enter slowly and consolidate.”
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