How Indian Companies Can Invest Abroad Under FEMA (ODI Route)
Indian businesses increasingly look outward — setting up subsidiaries, acquiring foreign companies, and forming overseas joint ventures. All of this falls under the FEMA Overseas Direct Investment (ODI) route. This guide explains how Indian companies can invest abroad under FEMA, including financial commitment limits, permissible activities, approvals, and reporting.
The ODI Framework
Outbound investment by Indian companies is governed by the Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022. An Indian company can invest in a foreign entity’s equity, extend loans, or give guarantees — together called the financial commitment. For the full picture, read our complete ODI guide.
Who Can Invest and How
An Indian company (or LLP) can invest abroad through:
- Equity capital of the foreign entity.
- Loans to the foreign entity (subject to conditions).
- Guarantees on behalf of the foreign entity.
Investment is routed through an authorised dealer (AD) bank, which acts as the channel to RBI.
Financial Commitment Limit
The total financial commitment of an Indian company is capped — generally expressed as a percentage of the company’s net worth as per its last audited balance sheet. Investments within this limit are under the automatic route; anything beyond requires RBI approval.
Permissible Activities
The foreign entity must be engaged in a bona fide business activity. ODI is restricted or prohibited for certain activities such as real estate (other than development of townships, roads, and similar), and for structures designed for round-tripping. Compliance with host-country laws is also required.
Control, Subsidiaries, and Step-Down Entities
An Indian company can establish a wholly owned subsidiary or joint venture abroad, and that entity can in turn have step-down subsidiaries, subject to the rules on layering and reporting. To set up a subsidiary overseas, see setting up a subsidiary abroad from India.
Reporting Requirements
| Filing | When |
|---|---|
| Form FC | At the time of investment (UIN allotted) |
| APR | Annually, by 31 December |
| Disinvestment reporting | On sale/closure of the foreign entity |
Read more on Form FC, UIN and APR and the Annual Performance Report.
Funding the Overseas Investment
The investment can be funded through the company’s own funds, market borrowings within limits, or swap of shares, in accordance with FEMA. All remittances flow through the AD bank with the required documentation.
Frequently Asked Questions
What is “financial commitment” in ODI?
It is the total of equity, loans, and guarantees an Indian company extends to the foreign entity.
Is there a cap on how much a company can invest abroad?
Yes — generally a percentage of net worth; beyond that, RBI approval is required.
Can an Indian company give a guarantee for its foreign subsidiary?
Yes, within the financial commitment framework and with proper reporting.
What activities are not allowed?
Real estate business (other than development) and structures meant for round-tripping, among others.
Expand Overseas with Confidence
S. Choudhary & Co. advises Indian companies on ODI structuring, limits, approvals, and reporting. Explore our Overseas Direct Investment services or call +91 90248 28295 · sushil@sushilchoudhary.com.
