What is the full form of ODI

ODI: Overseas Direct Investment

An investment made outside India in a joint venture (JV) or wholly owned subsidiary (WOS), whether through the automatic Route or the approval route, is referred to as Overseas Direct Investment, or ODI.

A capital contribution does the investment, a subscription to a foreign company's memorandum, or the purchase of existing shares of a foreign business through a market buy, a private placement, or a stock exchange.

What is ODI, and how important is it?

Overseas Direct Investment, or ODI, refers to investments made through market purchases, private placements, or stock exchanges but excludes portfolio investments. These investments can take the form of capital contributions, subscriptions to memoranda, or purchases of existing shares of foreign entities.

How do I make an ODI application?

Any Indian party planning to make an ODI must submit a properly completed Form ODI Part I to a designated Authorized Dealer with any necessary supporting documentation, such as a board resolution or statutory auditor certificate.

The remittance/investment will be completed when the papers have been examined and approved by the AD Bank following regulatory requirements.

Before the initial remittance, a Unique Identification Number (UIN) will be established for the specific Joint Venture/Wholly Owned Subsidiaries (JV/WOS). This UIN must be used for all subsequent investments and remittances to the JV/WOS.

Which industry is prohibited from using the ODI?

Indian parties are prohibited from investing in foreign companies in the real estate industry. Two activities that require prior RBI approval before investing are real estate (defined as the buying and selling of real estate or the trading of transferable development rights (TDRs), excluding the development of townships, the construction of residential or commercial properties, roads, or bridges), and banking.

A foreign company providing financial services tied to the Indian Rupee is prohibited from accepting investments from Indian Parties. Any investments in these entities require prior Reserve Bank of India approval.

Who may participate in an ODI?

Any other entity in India, as specified by the RBI; a Company; a Body created under an Act of Parliament; a Partnership Firm registered under the Indian Partnership Act, 1932; a Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008; Residents under the Liberalized Remittance Scheme (LRS).

What is direct investment outside India, and who is eligible for investment through the Automatic Route?

Investments made outside of India through the fully automated authorization routes, such as capital contributions, subscribers to an international entity's agreements of association, or the acquisition of shares outstanding of a foreign unit through market purchase, a private placement, or a stock exchange, are considered direct investments outside of India.

However, portfolio investments are not included in this category. A company incorporated in India, a body established by an act of parliament, a partnership firm registered under the Indian Partnership Act, 1932, or a limited liability corporation (LLP) recorded underneath the LLP Act, 2008 (6 of 2009), looking to invest in a joint venture or wholly owned subsidiary abroad are all considered Indian Parties (IPs), and includes any other entity."

As a result, when more than one such firm, body, or organization invests in the foreign unit, all companies, institutions, or entities comprise the 'Indian' unit.

What are the dues/receivables from a foreign corporation that can be capitalized automatically?

Under the automatic method, an Indian Party can capitalize dues and entitlements from a foreign company, such as export revenues, royalties, management, advisory, and other services. Export revenues capitalized after the realization will require the Reserve Bank's prior clearance.

Indian software exporters are allowed, with prior Reserve Bank approval, to receive 25% of the worth of their exports in the form of shares from an international software start-up company without entering into Joint Development Agreements.