Big guns salute eased investment norms

The Reserve Bank of India's move to further liberalise overseas investment norms enthused Indian companies as they explore growth options abroad. Given that corporate balance sheets are in the best shape ever, the RBI move will allow companies to undertake expansion plans with fewer restrictions. The monetary policy announced by the RBI on Thursday proposes to raise the ceiling of overseas investment by Indian entities in overseas joint ventures and/or wholly-owned subsidiaries from 100% to 200% of their net worth under the automatic route. The RBI also allowed authorised dealers to open foreign currency accounts of project offices set up in India by foreign companies. Earlier, RBI approval was needed on a case by case basis. Said Rahul Bajaj, chairman of Bajaj Auto, The RBI proposal will be of great help to profitable Indian companies which are looking at investments overseas. Bajaj Auto, which has a net worth of around Rs 4,000 crore, will now be eligible to invest up to Rs 8,000 crore in joint ventures or wholly-owned subsidiaries abroad through the automatic route. The intention is, no doubt, very good, but the amount is too large even for Bajaj Auto. Aditya Birla group flagship Grasim Industries' chief financial officer DD Rathi said: Life will become much easier for Indian companies. It's a major liberalisation on the procedural front. The diversified Aditya Birla Group has been in the forefront of acquiring capacities overseas to become a full-fledged Indian multinational. Automobile major Mahindra & Mahindra, which has also been venturing into overseas markets, said the move will now offer far greater flexibility to Indian corporates. This will come as a major encouragement for Indian companies to go abroad, said M&M vice president (finance) Uday Phadke. Software services firms like Infosys Technologies and Wipro have significant amount of cash on their books. Mohandas Pai, CFO at Infosys Technologies, however, said that companies needed more economic freedom than minor corrections. To my mind, this whole limit issue should be abolished and Indian corporates allowed to invest overseas as they deem fit, Mr Pai told ET. Deepak Ghaisas, CEO of India operations for i-flex Solutions, said that Indian companies have never used this limit anyway. However, it simplifies norms by bringing it under the automatic route. According to Jet Airways CFO Carl Saldanha: The RBI has shown confidence in corporate balance sheets through this liberalisation. According to a fund manager at a leading domestic mutual fund, this is a better way to manage the capital account. Indian companies have attained significant maturity level. They are unlikely to go on a reckless acquisition spree, the fund manager said.

Big guns salute eased investment norms

The Reserve Bank of India's move to further liberalise overseas investment norms enthused Indian companies as they explore growth options abroad.

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