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Entry Strategies for Foreign Investors

These websites of Indian government give adequate details

With the liberalization of the India economy, the large Indian market is being opened up to foreign investors. Several companies are setting up or have already set up operations in India to cater to the Indian market. There are several strategies by which a foreign enterprise can set - up Indian operations. This module aims to give the various entry options available to a foreign investor, especially for foreign direct investment. This module does not deal with portfolio investments.

Broadly, entry strategies may be classified into two major types :-

A foreign investor may directly set up its operations in India through a branch office or a representative office or liaison office or project office of the foreign Company ; or

It may do so through an Indian arm i.e. through a subsidiary company set - up in India under Indian laws.

Generally, setting up operations through an Indian arm is advisable, especially if the quantum of investment is huge.

A Foreign company is one that has been incorporated outside India and conducts business in India. These companies are required to comply with the provisions of the Indian Companies Act, 1956 as far as the Indian Operations are concerned.

Foreign companies can set up their operations in India through opening of liaison, project and branch offices. Such companies have to register themselves with the Registrar of Companies (ROC), New Delhi within 30 days of setting up a place of business in India.

The following are the entry strategies for a foreign enterprise in case the Indian operations are to be run directly by a foreign company through a branch office or a representative office or liaison office or project office of the foreign company :-

1. Liaison Office / Representative Office
2. Project Office
3. Branch Office
4. Appointment as Agent in India
6. 100% subsidiary company
7. Joint Venture manufacturing with an Indian partner
8. Transfer of Technology
9. Franchising

Joint venture with an Indian partner

Foreign companies can set up their operations in India by forging strategic alliances with Indian partners.

Setting up of operations through a joint venture may entail the following advantages for a foreign investor:-

established distribution/marketing set up of the Indian partners
available financial resources of the Indian partner
established contacts of the Indian partner which help smoothen the process of setting up of operations.