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INDEX

Details Page n

Certificate of the Company

Executive Summary of the project 4

About the Company 5

Rationale of the study 6

Research methodology

Scope of the study

Objectives of the study

Methodology and field visits

7

Analysis of exports of chemicals to Australia 10

Analysis of exports of food products to Australia 15

Opening office in Australia

Regulations by RBI

Australian rules and regulations

21

Findings , conclusion and recommendations 50

Appendix 54

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ACKNOWLEDGEMENT

The making of any project requires contribution from many people, right from inception till

its completion. In this case also, there had been a few people who have made this happen. It

was not only learning but also an enriching experience.

I feel indebted and place my special thanks to Mr. Satish P. Bhise (General manager) for

his active guidance, help, motivation and support throughout the training and project. I would

like to express my gratitude to Mr. Kishor Sanghvi (Managing Director) for providing me

the required inputs for the completion of the training and project and always being there

every time needed and requiredfor guidance.

I would like to express my gratitude to Our Dean Prof. (Col). A. Balasubrmanian and Dr.

S.M Inamdar Director Balaji Institute of International Business for their cooperation and

affectionate encouragement.

Finally, this report would not have been possible without the confidence, endurance and

support of my family. My family has always been a source of inspiration and encouragement

in every field of life and it is due to them I am whatever I am today.

ATRAYEE CHANDRA

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EXECUTIVE SUMMARY OF THE REPORT

The report presents the research titled Export activities in Zen Intratrade Pvt. Ltd.. The

company has been involved in the imports of chemicals for more than a decade and now

intends to diversify as exporters of both chemicals and food products. The research involves

the collection of data from the organisations from where data of export/ import of the food

products & chemicals could be received. Then the data collected was analysed to find out the

scope of exports and at the same time information was being gathered by the researcher to

know the formalities to be followed for opening a new subsidiary office for the company in

Australia as the comp[any wanted to float its branch. In the past 3 years the quantity of

chemicals exported to Australia had been quite less as compared to other countries though the

trade activities between India and Australia had been increasing at a good pace. Therefore the

company shall undergo market research to know the scope of exports in Australia. As far as

the food products are being concerned the increasing trend of trade between Australia and

India is a favourable indicator of the same. At the same time with the opening of office in

Melbourne would give an additional support to the company in its business. Some of the

recommendations that the researcher feels are as follows:-

Since the trend of exports and imports between India and Australia clearly reveal that

Indias exports have been increasing at a good pace, therefore the company has a good

scope of exports of food products to Australia.

The GDP growth rate of India as of now is 7.4% as compared to the expected growth

rate of 8%. Therefore it can be concluded that there is a possibility of more of Indian

exports.

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Since company is a new player in the export market therefore it should try to target

those countries (in addition to Australia) where the company can incur more profits

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ABOUT THE COMPANY

en Intratrade Private Limitedis becoming a trusted name in the chemical field

since last 1 decade. The company has been dealing in wide ranging products supplying to the

chemical industry at large. Its base in Mumbai has been a great advantage in reaching the

customers with efficient services. Slow but steady growth has enabled the company to spread

its wings in both Domestic and international markets. Our sourcing is done from reputable

International quality suppliers like Mitsui Chemicals ink. - (Japan), Dainippon Ink. &

Chemical - (Japan), Polimeri, Europe, SPA - (Italy).

GOAL :

Reach the newer heights in the Chemical Business Earning the Goodwill of the Customers as

well as Suppliers carving our own niche in the Sphere of Chemical Activities.

POLICY :

Service the customers through transparent & fair business practices by keeping pace with the

changing time to their satisfaction building reputation world-wide.We trust that our relentless

efforts to serve the Chemical Trade would enable us to be your business associates

developing into a long term relationship.

Services Engaged in :

Import & Export

Stock and Sale

High-Seas Sale

Bulk Chemical Storage

Un-interrupted Supplies

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Rationale of the Study

Zen Intratrade Private Limited is becoming a trusted name in the

chemical field since last 1 decade. The company has been dealing in

wide ranging products supplying to the chemical industry at large.

The company has been involved in imports of the chemicals from

various countries.

The company now intends to expand the export activities by

exporting more chemicals as well as diversifying its export acts in

various food products. The target country so chosen by the

company isAUSTRALIA.

.

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RESEARCH METHODOLOGY

Every project work is based on certain methodology, which is a way to systematically solve

the problem or attain its objectives. It is a very important guideline and lead to completion of

any project work through observation, data collection and data analysis.

Scope of the study

Each and every project study along with its certain objectives also have scope for future. And

this scope in future gives to new researches a new need to research a new project with a new

scope. Scope of the study not only consist one or two future business plan but sometime it

also gives idea about a new business which becomes much more profitable for the researches

then the older one.

Scope of the study could give the projected scenario for a new successful strategy

with a proper implementation plan. Whatever scope I observed in my project are not exactly

having all the features of the scope which I described above but also not lacking all the

features.

Objectives of the study

The specific objectives entrusted for the project report on export promotion of chemicals and

food products from India are as follows:

To prepare a detailed report on export promotion from India

To identify the constraints in the export promotion to Australia

To identify the scope of food items to be exported

To study the existing arrangements for the present export of products

To identify constraints in profitability

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To identify and suggest the action plan for the establishment of backward and

forward linkages in the present scenario

Methodology and Field Visit-

Preparation of the project report on export of food products and chemicals from India to

Australia involved collection of Primary as well as Secondary data from published as well as

unpublished sources. Since the project demanded for the complete study of the export

promotion process of both to AUSTRALIA, a need of lot of data which is both primary as

well as secondary data exists. The primary data is obtained from the sources like,

Federation of Indian Export Organisation (FIEO)

World Trade Centre (WTC)

Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council

(CHEMEXCIL)

Australian Trade Commission

Agricultural and Processed Food Products Exports Development Authority (APEDA)

Parle G Factory, Ville Parle

The Secondary data is collected from different sources like,

Internet

Australian Food Statistics

Directorate of Agricultural, Food and Fisheries

Journals and magazines related to chemical exports and imports

Directory of World Chemical Producers

Indian Industries and Trade Classifications

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Research Process

The research task assigned was broadly divided into 2 categories-export promotion of

Chemicals and Food Products. Therefore the researcher had the task to get the details on the

exports of the same in the past few years. At the same time it was also necessary to find out

the existing traders in this field. Therefore the researcher tried to search for the data by doing

visits to the concerned organisations. The researcher first went to the organisations that could

provide information regarding the export of chemicals. These were as follows-

Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council

(CHEMEXCIL)


Similarly for knowing the details regarding export of food products the researcher took

details by visiting:

Federation of Indian Export Organisation (FIEO)

Agricultural and Processed Food Products Exports Development Authority (APEDA)


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ANALYSIS OF THE EXPORT OF CHEMICALS TO

AUSTRALIA

The researcher was asked to collect available information on electroplating chemicals the

company had decided to export. The chemicals so decided to be exported were:

1. Benzal Acetone

2. Benzylidene Acetone

3. Bis Benzene Sulphonimide

4. Cumene sulphonate Sodium

5. Hydroxyl Amine Hydrochloride

6. Pyridinium Hydroxy Sulphobetiane

7. Sodium Acetate Trihydrate Crystals

8. Xylene Sulphonate Sodium

To go further about with the research, the HSC codes of the chemicals had to be

found out. In order to get the HSC codes the researcher took help from the DGFT, Handbook

of Procedures. DGFT, Handbook of procedures contains the list of all the items that are being

exported from the country.

The researcher faced difficulty while obtaining the HSC codes of some chemicals as they

were not available in the list or categorised as others. Yet the researcher was successful in

obtaining the HSC codes of some of the chemicals.

After obtaining the HSC codes the researcher approached the office of CHEMEXCIL to

obtain the details of exports and imports of the respective chemicals, the details of the traders

engaged in the export of the same and the export trend of these chemiclas.

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The researcher found that there were certain chemicals about which there were no details as

NO EXPORTS of such chemicals took place in past three years. The details of the findings

are listed as below:-

Name of chemicals HSC code Parties to be contacted

Benzal Acetone 29143900 No details found

Benzylidene Acetone 29143900 No details found

Bis Benzene Sulphonimide Not found No details found

Cumene sulphonate Sodium

2904 o Navdeep Chemicals Pvt. Ltd.

o Sterling Auxilaries Pvt. Ltd.

o Unisource Chemicals Pvt. Ltd.

Hydroxyl Amine

Hydrochloride

28251000 No details found

Pyridinium Hydroxy

Sulphobetiane

39131000 o Alcatraz Chemicals

Sodium Acetate(Crystals) 29152200 (*) mentioned after table

Xylene Sulphonate Sodium 27073000

o Apurva Chemicals

o Navdeep Chemicals Pvt. Ltd.

o S A Pvt. Ltd.

o Nityassi Chemicals

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(*) From t availabl sources t ere was onl 1 chemical about which the details of exports

were obtained. The chemical was Sodi l Its HSC code is 29152200.

Ex ort of Sodi Acetate (i quantity)

Ex ort of Sodium Acetate (in Rupees)

0

00000

000000

00000

20000002

00000

3000000

3

00000

4000000

4

00000

000000

2006-07 2007-08

2 27

2

496680

2006-07

2007-08

0

0000000

20000000

30000000

40000000

0000000

60000000

70000000

80000000

90000000

0000000

2006-07 2007-08

689

366

926 0447

2006-07

2007-08

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As it is clear form the graph thatthe quantit of Sodium Acetate exported from India in the

financial year 2006-07 was 25,27,152 kg and it increased by 96.5 % to 49,66,801 kg in the

2007-08. Also the revenue realised also registered a increased by 34.3% to Rs.9,26,50,447 in

the financial year 2007-08.

Inference drawn

Viewing the growth in the export ofthe chemicalthe company has a scope of exportingthe

chemicalin future to Australia.

Another important point inferred was that there has been no export of any chemical from

India to Australia in the past year. Therefore the company thought of the scope to export

these electroplating chemicals. As the export ofthese chemicals to Australia had nottaken in

the past, the company saw added advantage of exploiting the value of these exports and

expected a marginal growth along the service it will provide.

INDIAS E RTS FORINORGANIC/ORGANIC AND AGRO CHE ICALS

(IN Rs.Crores)

7200

7400

7600

7800

8000

8200

8400

8600

2006 2007

7726.5

8584.5

2006

2007

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The exports of chemicals from India has registered a growth of 11.11% which in itself reveal

the broad scope of the exports of chemicals from the country. Thus it can be clearly

undersood that the export market is increasing in the country.

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ANALYSIS OF THE EXPORT OF FOOD PRODUCTS TO

AUSTRALIA

The company also wants to diversify its export activities by indulging its deals with food

products. The company further concentrated on export of vegetarian processed food

products as the range of food items is vast. Since the Australian people are very particular

about the food, therefore a study about the Australian food was done.

The Australian Food Industry

Australias food industry encompasses a wide range of products.Today the food industry is

a vital component of the Australian economy. Food accounts for 46 per cent of all retailing

turnover in Australia, with total food and liquor retail spending in 200607 rising to $106.6

billion, an 8 per cent increase from the previous year.

The industry makes a significant contribution to the economies of regional areas through

employment, business and service opportunities. There were around 191, 400 people

employed in food and beverage manufacturing in Australia in 200607.

The processed food and beverage industry is Australias largest manufacturing industry with

a turnover of more than $71.4 billion in 200506. Growth in the value of output has averaged

around 2 per cent a year over the past ten years.

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:

OVERVIEW OF THE FOOD PROCESSING INDUSTRY

The food processing industry in Australia covers a number of sectors

Name ofthe sector Val e(i Rs.crore) Percentage

Bakery Products 4005 6

Beverage and malt manufacturing 13289 19

Dairy Products 9991 14

Flour mill and cereal food manufacturing 3692 5

Fruit and vegetable processing 4672 6

Meat and meat products 17836 25

il and fat manufacturing 1547 2

6%

19%

14%

5%

6%

25%

2%

2%

9%

12%

Bakery products

Beverageand malt

manufacturing

Dairy products

Flour millandcerealfood

manufacturing

Fruitandvegetable

processing

Meatand meat products

Oilandfat manufacturing

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Sea food processing 1330 2

Sugar and confectionary manufacturing 6456 9

Other food manufacturing 8554 12

Although the value of Australias food imports increased by 10 per cent to around $9 billion,

Australia remains a significant net exporter of food, with an export surplus of $14 billion

over food imports in 2007-08. Over the past five years this surplus has averaged $18 billion a

year in constant dollar terms. Net imports of processed fruit and vegetables increased by 25

per cent to $822 million and net imports of processed seafood increased by 9 per cent to $655

million in 2007-08.

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After having the brief view about the Australian food industry , the company decided to

export the following food items:-

LIST OF THE ITEMS HICH ZEN INTRA TRADE INTENDS TO EXPORT TO

AUSTRALIA

S.no. Particulars Cases eight

1 Priya pickles(All variants,excepts Lemon & Garlic Pickle) 10 each 1 kg

2 Maggie 100 720 g

3 Parle-G 100 825 g

4 Haldiram( All Variants) 10 each 200 g

5 Haldiram( All Variants) 10 each 350 g

6 Haldiram( All Variants) 5 each 1 kg

7 Tez Mustard Oil 20 1 lit.

8 Tez Mustard Oil 20 2 lit.

9 Amul Ghee 100 1 lit.



12 Sagar Ghee 50 1 lit.

13 Sagar Ghee 20 2 lit.

14 Dawat Deewaya Rice 5 kg



17 Thumps Up Can 100 Standard

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18 Kurkure Masala Munch 20 Standard

19 Kurkure rajasthani 20 Standard

20 Lays (2 variety) 20 Standard

21 India Gate Premium Basmati Rice 5 kg



24 Waghbakri Tea 500 g

25 Waghbakri Tea 1 kg

26 Waghbakri Tea bags

In order to know the parties to be contacted for the procurement of the above products,

the researcher went to APEDA where the following parties were being asked to contact

for the same. The list of the parties in Mumbai is as follows:-

Food product Name of the party Contact details

Haldirams Mr. Ketki 9820025344

Parle-G Ville parle office 020-66916911/14

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Maggie

9848895566

040-44363322

040-44363263

Amul ghee Mr. Peter 9322104204

Tea board Office 020-22041699

IOPEA(Oil) Office 020-22029295

The researcher was asked to find out how many packets one case of food items will

contain. After the detailed survey it was found out that the number of packets in each case

was completely the choice of the importer. It is the importer who is supposed to specify

the number of packets he wants in one case.

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OPENING OFFICE IN AUSTRLIA

The company is expanding its business activities by entering into exports of food products to

Australia. The company may have to increase its network in order to have smooth trade in

future and therefore the company intends to open an office in Melbourne so that it serves two

benefits. Firstly it would help in expansion of the network and secondly it would increase the

awareness about the company and gradually will help in the brand building of the company.

The researcher has therefore tried to enquire about the legal as well as administrative

formalities to be followed for opening a subsidiary office in Australia. The researcher found

that there are various formalities to be undergone. Among all , the regulations laid down by

RBI are considered to be of prior importance.

The regulations laid by RBI are as per the following circular issued by RBI:-

RBI/2009-10/21

Master Circular No. 01/2009-10

July 1, 2009

To,

All Banks Authorised to Deal in Foreig n Exchange

Madam / Sir,

Master Circular on Direct Investment by Residents in Joint Venture (JV)/Wholly Owned Subsidiary (WOS) Abroad

Direct investments by residents in Joint Ventu re (JV) and Wholly Owned Subsidiary(WOS) abroad are being allowed, in ter ms of clause (a) of sub-section (3) of section6 of the Foreign Exchange Management Act 1999, (42 of 1999) read with FEMANotification 120/RB-2004 dated July 7, 2004, (GSR 757 (E) dated November 19,2004), viz. Foreign Exchange Management (Transfer or Issue of Any ForeignSecurity) Regulations, 2004, as amended from time to time.

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2. This Master Circular consolidates the existing instructions on the subjectofDirect Investment by Residents in Joint Venture (JV) / Wholly OwnedSubsidiary (WOS) Abroad" at one place. The list of underlyingcirculars/notifications is furnished in the Appendix.

3. This Master Circular is issued with a sunset clause of one year. This circular will

stand withdrawn on July 01, 2010 and be replaced by an updated Master Circular onthe subject.

Yours faithfully,

(Salim Gangadharan)Chief General Manager-in-Char

INDEX

PART - I

Section A General

A.1 Introduction

A.2 Statutory basis

A.3 Prohibitions

A.4 General Permission

Section B - Direct Investment Outside India

B.1 Automatic Route

B.3 Method of Funding

B.4 Capitalisation of exports and other dues

B. 5. Investments in Financial Services Sector

B. 6 Investment in Equity of Companies Registered Overseas / RatedDebt Instruments

(1) (i) Portfolio Investments by listed Indian companies

(ii) Investment by Mutual Funds

B.7 Approval of the Reserve Bank

B.8 Investments in energy and natural resources sector

B.9 Overseas Investments by Proprietorship Concerns

B. 10 Overseas investment by Registered Trust / Society

B. 11 Post investment changes / additional investment in existing JV /WOS

B.12 Acquisition of a foreign company through bidding or tenderprocedure

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B.13 Obligations of Indian Entity

B.14 Transfer by way of sale of shares of a JV / WOS

B.15 Pledge of Shares of JV/WOS

B.16 Hedging of Overseas Direct Investments

SECTION C - Other Investments in Foreign Securities

C.1 Permission for purchase/ acquisition of foreign securities in certaincases

C.2 Pledge of a foreign security by a person resident in India

C.3 General permission in certain cases

PART - II Operational Instructions to Authorised Dealer Banks

1.Designated branches

2. Investments under Regulation 6 of Notification No. FEMA 120/2004 -RB

dated July 7, 2004

3.General procedural instructions

4. Investments under Regulation 11 of Notification No. FEMA 120/2004 -RB dated July 7, 2004

5. Allotment of Unique Identification Number (UIN)

6. Investment by way of share swap

7. Investments under Regulation 9 of Notification No. FEMA 120/2004 -RBdated July 7, 2004

8. Purchase of foreign securities under ADR / GDR linked Stock Option

Scheme

9. Remittance towards Earnest Money Deposit or Issue of Bid BondGuarantee

10. Transfer by way of sale of shares of a JV / WOS outside India

11. Verification of evidence of investment

Annex - A

Annex B

Annex C

Appendix

PART - I

Section A General

A.1 Introduction

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(1) Overseas investments in Joint Ventures (JV) and Wholly Owned Subsidiaries(WOS) have been recognised as important avenues for promoting global businessby Indian entrepreneurs. Joint ventures are perceived as a medium of economic co -operation between India and othe r countries. Transfer of technology and skill,sharing of results of R&D, access to wider global market, promotion of brand image,generation of employment and utilisation of raw materials available in India and in

the host country are other significant benefits arising out of such overseasinvestments. They are also important drivers of foreign trade through increasedexports of plant and machinery and goods and services from India and also a sourceof foreign exchange earnings by way of dividend earnings, royalty, technical know-how fee and other entitlements on such investments.

(2) In keeping with the spirit of liberalisation, which has become the hallmark ofeconomic policy in general, and Foreign Exchange regulations in particular, theReserve Bank has been progressively relaxing the rules and simplifying theprocedures both for current account as well as capital account transactions.

A.2 Statutory basis

(1) Section 6 of the Foreign Exchange Management Act, 1999 provides powers tothe Reserve Bank to specify, in consultation with the Government of India theclasses of permissible capital account transactions and limits up to which foreignexchange is admissible for such transactions. Section 6(3) of the aforesaid Actprovides powers to the Reserve Bank to prohibit, restrict or regulate varioustransactions referred to in the sub-clauses of that sub-section, by makingRegulations.

(2) In exercise of the above powers, the Reserve Bank has in supersession ofearlier Notification No.FEMA19/RB-2000 dated 3rd May 2000 and amendmentsthereto, issued Foreign Exchange Management (Transfer or Issue of any ForeignSecurity) Regulations, 2004 vide Notification No. FEMA 120/RB-2004 dated July 7,2004 (as amended vide Notification No. FEMA 132/2005-RB dated 31st March2005, Notification No. FEMA 135/2005-RB dated 17th May 2005 , Notification No.FEMA 139/2005-RB dated 11th August 2005, Notification No. FEMA 150/2006-RBdated 21st August 2006, Notification No. FEMA 164/2007-RB dated 9th October2007, Notification No. FEMA173/2007-RB dated 19th December 2007, NotificationNo. FEMA 180/2008-RB dated 5th September 2008 and Notification No.FEMA181/2008-RB dated 1st October 2008(hereinafter referred to as theNotification). The Notification seeks to regulate acquisition and transfer of a foreignsecurity by a person resident in India i.e. investment by Indian entities in o verseas joint ventures and wholly owned subsidiaries as also investment by a person

resident in India in shares and securities issued outside India. Overseas Investmentcan be made under two routes viz. (i) Automatic Route outlined in paragraph B.1and (ii) Approval Route outlined in paragraph B.7.

A.3 Prohibitions

Indian parties are prohibited from making investment in a foreign entity engaged inreal estate (as defined in Regulation 2(p) * of the Notification) or banking business,without the prior approval of the Reserve Bank.

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A.4 General Permission

In terms of Regulation 4 of the Notification, general permission has been granted topersons residents in India for purchase / acquisition of securities in the followingmanner:

(a) out of funds held in RFC account;(b) as bonus shares on existing holding of foreign currency shares; and(c) when not permanently resident in India, out of their foreign currency resourcesoutside India.

General permission is also available to sell the shares so purchased or acquired.

Section B - Direct Investment Outside India

B.1 Automatic Route

(1) In terms of Regulation 6 of the Notification, an Indian party has been permittedto make investment in overseas Joint Ventures (JV) / Wholly Owned Subsidiaries(WOS), not exceeding 400 per cent of the net worth of the Indian party as on thedate of the last audited balance sheet.

(2) The ceiling of 400 per cent of net worth will not be applicable where theinvestment is made out of balances held in Exchange Earners' Foreign Currencyaccount of the Indian party or out of funds raised through ADRs/GDRs. The Indianparty should approach an Authorised Dealer Category - I bank with an application inForm ODI (Annex A) and prescribed enclosures / documents for effectingremittances towards such investments.

(3) The above ceiling will include contribution to the capital of the overseas JV /WOS, loan granted to the JV / WOS, and 100 per cent of guarantees issued to or onbehalf of the JV/WOS. The investments are subject to the following conditions:

a) The Indian entity may extend loan / guarantee to an overseas concern only inwhich it has equity participation. Indian entities may offer any form of guarantee -corporate or personal / primary or collateral / guarantee by the promoter company /guarantee by group company, sister concern or associate company in India providedthat:

i) All financial commitments including all forms of guarantees are within the overallceiling prescribed for overseas investment by the Indian party i.e. currently within

400 per cent of the net worth as on the date of the last audit ed balance sheet of theIndian party;

ii) No guarantee is 'open ended' i.e. the amount and period of the guarantee shouldbe specified upfront; and

iii) As in the case of corporate guarantees, all guarantees are required to be reportedto Reserve Bank, in Form ODI-Part II. Guarantees issued by banks in India in favourof WOSs / JVs outside India, would be outside this ceiling and would be subject to

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prudential norms, issued by the Reserve Bank (DBOD) from time to time.

Note: Specific approval of the Reserve Bank will be required for creating charge onimmovable property and pledge of shares of the Indian parent/ group companies infavour of a non- resident entity.

b) The Indian party should not be on the Reserve Banks Exporters' caution list / listof defaulters to the banking system circulated by the Reserve Bank / CreditInformation Bureau (India) Ltd (CIBIL) / or any other credit information company asapproved by the Reserve Bank or under investigation by any investigation /enforcement agency or regulatory body.

c) All transactions relating to a JV / WOS should be routed through one branch of an Authorised Dealer bank to be designated by the Indian party.

d) In case of partial / full acquisition of an existing foreign company, where theinvestment is more than USD 5 million, valuation of the shares of the company shallbe made by a Category I Merchant Banker registered with SEBI or an Investment

Banker / Merchant Banker outside India registered with the appropriate regulatoryauthority in the host country; and, in all other cases by a Chartered Accountant or aCertified Public Accountant.

e) In cases of investment by way of swap of shares, irrespective of the amount,valuation of the shares will have to be made by a Category I Merchant Bankerregistered with SEBI or an Investment Banker outside India registered with theappropriate regulatory authority in the host country. Approval of the ForeignInvestment Promotion Board (FIPB) will also be a prerequisite for investment byswap of shares.

f) In case of investment in overseas JV / WOS abroad by a registered Partnershipfirm, where entire funding for such investment is done by the firm, it will be in orderfor individual partners to hold shares for and on behalf of the firm in the overseas JV/ WOS if the host country regulations or operational requirements warrant suchholdings.

g) (i) Investments in JV/WOS abroad by Indian party through the medium of aSpecial Purpose Vehicle (SPV) are also permitted under the Automatic Route,subject to the conditions that the Indian party is not included in the Reserve Bank'sCaution list or is under investigation by the Directorate of Enforcement or included inthe list of defaulters to the banking system circulated by the Reserve Bank/any otherCredit Information company as approved by the Reserve Bank. Indian parties

whose names appear in the Defaulters' list require prior approval of the ReserveBank for the investment.

(ii) Setting up of an SPV overseas under the Automatic Route is permitted only forthe purpose of investment in JV/WOS overseas.

h) An Indian party may acquire shares of a foreign company engaged in a bonafidebusiness activity, in exchange of ADRs/GDRs issued to the latter in accordance withthe Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares

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(through Depository Receipt Mechanism) Scheme, 1993, and the guidelines issuedthere under from time to time by the Government of India, provided:

(i) ADRs/GDRs are listed on any stock exchange outside India;

(ii) The ADR and/or GDR issue for the purpose of acquisition is backed by underlying

fresh equity shares issued by the Indian party;

(iii) The total holding in the Indian entity by persons resident outside India in theexpanded capital base, after the new ADR and/or GDR issue, does not exceed thesectoral cap prescribed under the relevant regulations for such investment underFDI;

(iv) Valuation of the shares of the foreign company shall be

(a) as per the recommendations of the Investment Banker if the shares are not listedon any recognized stock exchange; or

(b) based on the current market capitalisation of the foreign company arrived at onthe basis of monthly average price on any stock exchange abroad for the threemonths preceding the month in which the acquisition is committed and over andabove, the premium, if any, as recommended by the Investment Banker in its duediligence report in other cases.

(4) The Indian Party is required to report such acquisition in form ODI to the AD Bankfor submitting to the Reserve Bank within a period of 30 days from the date of thetransaction.

Note: Investments in Nepal are permitted only in Indian rupees. Investments inBhutan are permitted in Indian Rupees as well as in freely convertible currencies. Alldues receivable on investments made in freely convertible currencies, as well astheir sale / winding up proceeds are required to be repatriated to India in freelyconvertible currencies only. The automatic route facility is not available forinvestment in Pakistan.

B.2 Investment in unincorporated entities overseas in oil sector under the

Automatic Route

(1). Investments in unincorporated entities overseas in the oil sector (i.e. forexploration and drilling for oil and natural gas, etc.) by Navaratna PSUs, ONGCVidesh Ltd.(OVL) and Oil India Ltd.(OIL) may be permitted by AD Category - I banks,

without any limit, provided such investments are approved by the competentauthority.

(2). Other Indian companies are also permitted under the Automatic Route to investin unincorporated entities overseas in the oil sector up to 400 per cent of its networth provided the proposal has been approved by the competent authority and isduly supported by certified copy of the Board resolution approving such investment.Investment in excess of 400 per cent of the net worth of an Indian company shallrequire prior approval of the Reserve Bank.

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B.3 Method of Funding

(1). Investment in an overseas JV / WOS may be funded out of one or more of thefollowing sources:

i) drawal of foreign exchange from an AD bank in India;

ii) capitalisation of exports;

iii) swap of shares (valuation as mentioned in para B.1 (e) above);

iv) proceeds of External Commercial Borrowings (ECBs) / Foreign CurrencyConvertible Bonds (FCCBs);

v) in exchange of ADRs/GDRs issued in accordance with the Scheme for issue ofForeign Currency Convertible Bonds and Ordinary Shares (through DepositoryReceipt Mechanism) Scheme, 1993, and the guidelines issued thereunder from timeto time by the Government of India;

vi) balances held in EEFC account of the Indian party; and

vii) proceeds of foreign currency funds raised through ADR / GDR issues.

In respect of (vi) and (vii) above, the ceiling of 400 per cent of the net worth will notapply. However, in respect of investments in the financial sector, they will be subjectto compliance with Regulation 7 of the Notification ibid, irrespective of the method offunding.

(2). General permission has been granted to persons resident in India for purchase /acquisition of securities in the following manner :

(i) out of funds held in RFC account;

(ii) as bonus shares on existing holding of foreign currency shares; and

(iii) when not permanently resident in India, out of their foreign currency resourcesoutside India (para A.4 above)

B.4 Capitalisation of exports and other dues

(1). Indian party is permitted to capitalise the payments due from the foreign entity

towards exports, fees, royalties or any other dues from the foreign entity for supply oftechnical know-how, consultancy, managerial and other services within the ceilingsapplicable. Capitalisation of export proceeds remaining unrealised beyond theprescribed period of realization will require prior approval of the Reserve Bank.

(2). Indian software exporters are permitted to receive 25 per cent of the value oftheir exports to an overseas software start -up company in the form of shares withoutentering into Joint Venture Agreements, with prior approval of the Reserve Bank.

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B. 5. Investments in Financial Services Sector

(1). In terms of Regulation 7 of the Notification, an Indian party seeking to makeinvestment in an entity outside India, which is engaged in the financial sector shouldfulfill the following additional conditions:

(i) be registered with the regulatory authority in India for conducting the financialsector activities;

(ii) has earned net profit during the preceding three financial years from the financialservices activities;

(iii) has obtained approval from the regulatory authorities concerned both in Indiaand abroad for venturing into such financial sector activity; and

(iv) has fulfilled the prudential norms relating to capital adequacy as prescribed bythe concerned regulatory authority in India.

(2). Any additional investment by an existing JV/WOS or its step down subsidiary inthe financial services sector is also required to comply with the above conditions.

(3). Regulated entities in the financial sector making investments in any activityoverseas are required to comply with the above guidelines. Unregulated entities inthe financial services sector in India may invest in non financial sector activitiessubject to compliance with the provisions of Regulation 6 of the Notification. It isfurther clarified that trading in Commodities Exc hanges overseas and setting upJV/WOS for trading in overseas exchanges will be reckoned as financial servicesactivity and require clearance from the Forward Markets Commission.

B. 6 Investment in Equity of Companies Registered Overseas / Rated DebtInstruments

(1) (i) Portfolio Investments by listed Indian companies

Listed Indian companies are permitted to invest up to 50 per cent of their net worthas on the date of the last audited balance sheet in (i) shares and (ii) bonds / fixedincome securities, rated not below investment grade by accredited / registered creditrating agencies, issued by listed overseas companies .

(ii) Investment by Mutual Funds

Indian Mutual Funds registered with SEBI are permitted to invest within an overallcap USD 7 billion in :

i) ADRs / GDRs of the Indian and foreign companies;

ii) equity of overseas companies listed on recognised stock exchanges overseas ;

iii) initial and follow on public offerings for listing at recognized stock exchangesoverseas;

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iv) foreign debt securities in the countries with fully convertible currencies, short -term as well as long-term debt instruments with rating not below investment grade byaccredited/registered credit agencies;

v) money market instruments rated not below investment grade;

vi) repos in the form of investment, where the counterparty is rated not belowinvestment grade. The repos should not, however, involve any borrowing of funds bymutual funds;

vii) government securities where the countries are rated notbelow investment grad e;

viii) derivatives traded on recognized stock exchanges overseasonly for hedging andportfolio balancing with underlying as securities;

ix) short-term deposits with banks overseas where the issuer is rated not belowinvestment grade; and

x) units / securities issued by overseas Mutual Funds or Unit Trusts registered withoverseas regulators and investing in (a) aforesaid securities, (b) Real EstateInvestment Trusts (REITS) listed on recognized stock exchanges overseas, or (c)unlisted overseas securities (not exceeding 10 per cent of their net assets).

(2). A limited number of qualified Indian Mutual Funds, are permitted to investcumulatively up to USD 1 billion in overseas Exchange Traded Funds as may bepermitted by SEBI.

(3). Domestic Venture Capital Funds registered with SEBI may invest in equity andequity linked instruments of off-shore Venture Capital Undertakings, subject to anoverall limit of USD 500 million. Mutual Funds / Venture Capital Funds desirous ofavailing of this facility may approach SEBI for necessary permission.

(4). General permission is available to the above categories of investors for sale ofsecurities so acquired.

B.7 Approval of the Reserve Bank

(1). Prior approval of the Reserve Bank would be required in all other cases of directinvestment abroad. For this purpose, application together with necessary documentsshould be submitted in Form ODI through their Authorised Dealer Category I

banks.

(2). Reserve Bank would, inter alia, take into account the following fa ctors whileconsidering such applications:

a) Prima facie viability of the JV / WOS outside India;

b) Contribution to external trade and other benefits which will accrue to India throughsuch investment;

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c) Financial position and business track record of the Indian party and the foreignentity; and

d) Expertise and experience of the Indian party in the same or related line of activityof the JV / WOS outside India.

B.8 Investments in energy and natural resources sector

Reserve Bank will consider applications for investment in JV/WOS overseas in theenergy and natural resources sectors (e.g. oil, gas, coal and mineral ores) in excessof 400 per cent of the net worth of the Indian companies as on the date of the lastaudited balance sheet. AD Category - I banks may forward such applications fromtheir constituents to the Reserve Bank as per the laid down procedure.

B.9 Overseas Investments by Proprietorship Concerns

(1) With a view to enabling recognized star exporters with a proven track record and

a consistently high export performance to reap the benefits of globalization andliberalization, proprietorship concerns and unregistered partnership firms are allowedto set up JVs / WOS outside India with the prior approval of the Reserve Banksubject to satisfying certain eligibility criteria. An application in form ODI may bemade to the Chief General Manager, Reserve Bank of India, Foreign ExchangeDepartment, Overseas Investment Division, Central Office, Amar Building, 5thFloor, Fort, Mumbai 400 001, through the AD Category - I bank. AD Category - Ibanks may forward the applications to the Reserve Bank along with their commentsand recommendations, for consideration.

(2). Investments by established proprietorship or unregistered partnership exporter

firms will be subject to the following conditions:

i) The Partnership / Proprietorship firm is a DGFT recognized Star Export House.

ii) The AD Category I bank is satisfied that the exporter is KYC (Know YourCustomer) compliant and is engaged in the pr oposed business and meets therequirement as indicated at i) above.

iii) Exporter has proven track record i.e. overdue exports do not exceed 10 per centof the average export realization of preceding three financial years.

iv) The exporter has not come under adverse notice of any Government agency like

Directorate of Enforcement, CBI and does not appear in the exporters' caution list ofthe Reserve Bank or in the list of defaulters to the banking system in India.

v) The amount of investment outside India does not exceed 10 per cent of theaverage of three financial years export realization or 200 per cent of the net ownedfunds of the firm, whichever is lower.

B. 10 Overseas investment by Registered Trust / Society

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Registered Trusts and Societies engaged in manufacturing / educational / hospitalsector are allowed to make investment in the same sector(s) in a JV/WOS outsideIndia, with the prior approval of the Reserve Bank. Trusts / Societies satisfying theeligibility criteria, as indicated below, may submit the application/s in Form ODI-PartI, through their AD Category - I bank/s, to the Chief General Manager, Reserve Bankof India, Foreign Exchange Department, Overseas Investment Division, Central

Office, Amar Building, 5th Floor, Fort, Mumbai 400 001, for consideration.

Eligibility Criteria :

(a) Trust

i) The Trust should be registered under the Indian Trust Act, 1882;

ii) The Trust deed permits the proposed investment overseas;

iii) The proposed investment should be approved by the trustee/s;

iv) The AD Category I bank is satisfied that the Trust is KYC (Know YourCustomer) compliant and is engaged in a bonafide activity;

v) The Trust has been in existence at least for a period of three years;

vi) The Trust has not come under the adverse notice of any Regulatory /Enforcement agency like the Directorate of Enforcement, Central Bureau ofInvestigation (CBI), etc.

(b) Society

i) The Society should be registered under the Societies Registration Act, 1860.

ii) The Memorandum of Association and rules and regulations permit the Society tomake the proposed investment which should also be approved by the governingbody / council or a managing / executive committee.

iii) The AD Category - I bank is satisfied that the Society is KYC (Know YourCustomer) compliant and is engaged in a bonafide activity;

iv) The Society has been in existence at least for a period of three years;

v) The Society has not come under the adverse notice of any Regulatory /

Enforcement agency like the Directorate of Enforcement, CBI etc.

In addition to the registration, the activities which require special license / permissioneither from the Ministry of Home Affairs, Government of India or from the relevantlocal authority, as the case may be, the AD Category I bank should ensure thatsuch special license / permission has been obtained by the applicant.

B. 11 Post investment changes / additional investment in existing JV / WOS

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A JV / WOS set up by the Indian party as per the Regulations may diversify itsactivities / set up step down subsidiary / alter the shareholding pattern in theoverseas entity (subject to compliance of Regulation 7 of the Notification in the caseof financial services sector companies). The Indian party should report to theReserve Bank through the AD Category - I bank, the details of such decisions within30 days of the approval of those decisions by the competent authority of the JV /

WOS concerned in terms of local laws of the host country, and include the same inthe Annual Performance Report (APRPart III of form ODI) required to beforwarded to the AD Category-I bank.

B.12 Acquisition of a foreign company through bidding or tender procedure

An Indian party may remit earnest money deposit or issue a bid bond guarantee foracquisition of a foreign company through bidding and tender procedure and alsomake subsequent remittances t hrough an AD Category - I bank, in accordance withthe provisions of Regulation 14 of the Notification.

B.13 Obligations of Indian Entity

(1). An Indian party which has made direct investment abroad is under obligation to(a) receive share certificate or any other document as an evidence of investment, (b)repatriate to India the dues receivable from foreign entity, and (c) submit thedocuments / Annual Performance Report to the Reserve Bank, in accordance withthe provisions specified in Regulation 15 of the Notification. The share certificate orany other document as evidence of investment has to be submitted to and retainedby the designated AD Category - I bank, who is required to monitor the receipt ofsuch documents and satisfy themselves about the bonafides of the documents. Acertificate to this effect should be submitted by the designated AD category I bankto the Reserve Bank alongwith the APR (Part III of Form ODI).

(2). Reporting requirements including submission of Annual Performance Report arealso applicable for investors in unincorporated entities in the oil sector.

B.14 Transfer by way of sale of shares of a JV / WOS

(1) Indian parties may also disinvest without prior approval of the Reserve Bank, inany of the under noted categories:

i) in case where the JV / WOS is listed in the overseas stock exchange;

ii) in cases where the Indian promoter company is listed on a stock exchange in India

and has a net worth of not less than Rs.100 crore; and

iii) where the Indian promoter is an unlisted company and the investment in theoverseas venture does not exceed USD 10 million.

(2).The disinvestment shall be subject to the following conditions:

(i) the sale does not result in any write-off of the investment made;

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(ii) the sale is effected through a stock exchange where the shares of the overseasJV/ WOS are listed;

(iii) if the shares are not listed on the stock exchange and the shares are disinvestedby a private arrangement, the share price is not less than the value certified by aChartered Accountant / Certified Public Accountant as the fair value of the shares

based on the latest audited financial statements of the JV / WOS;

(iv) the Indian party does not have any outstanding dues by way of dividend,technical know-how fees, royalty, consultancy, commission or other entitlements,and / or export proceeds from the JV or WOS;

(v) the overseas concern has been in operation for at least one full year and theAnnual Performance Report has been submitted to the Reserve Bank; and

(vi) the Indian party is not under investigation by CBI / DOE/ SEBI / IRDA or anyother regulatory authority in India.

The Indian entity is required to submit details of the disinvestment through itsdesignated AD Category I bank within 30 daysfrom the date of disinvestment. AnIndian party, which does not satisfy the conditions laid down, shall have to apply tothe Reserve Bank for prior permission.

B.15 Pledge of Shares of JV/WOS

An Indian party may pledge the shares of JV / WOS to an AD Category I bank or apublic financial institution in India for availing of any credit facility for itself or for theJV / WOS abroad in terms of Regulation 18 of the Notification. Indian party may alsotransfer by way of pledge, the shares held in overseas JV/WOS, to an overseaslender, provided the lender is regulated and supervised as a bank and the totalfinancial commitments of the Indian party remain within the limit stipulated by theReserve Bank for overseas investments, from time to time.

B.16 Hedging of Overseas Direct Investments

(1). Resident entities having overseas direct investments are permitted to hedge theforeign exchange rate risk arising out of such investments. AD Category - I banksmay enter into forward / option contracts with resident entities who wish to hedgetheir overseas direct investments (in equity and loan), subject to verification of suchexposure. Cancellation of such forward contracts may be permitted by AD Category -I banks and 50 per cent of such cancelled contracts may be allowed to be rebooked.

(2). If a hedge becomes naked in part or full owing to shrinking of the market value ofthe overseas direct investment, the hedge may continue to the original maturity.Rollovers on the due date are permitted up to the extent of market value as on thatdate.

SECTION C - Other Investments in Foreign Securities

C.1 Permission for purchase/ acquisition of foreign securities in certain cases

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General permission has been granted to a person resident in India who is anindividual -

a) to acquire foreign securities as a gift from any person resident outside India;

b) to acquire shares under cashless Employees Stock Option Programme (ESOP)

issued by a company outside India, provided it does not involve any remittance fromIndia;

c) to acquire shares by way of inheritance from a person whether resident in oroutside India;

d) to purchase equity shares offered by a foreign company under its ESOPSchemes, if he is an employee, or, a director of an Indian office or branch of aforeign company, or, of a subsidiary in India of a foreign company, or, an Indiancompany in which foreign equity holding, either direct or through a holdingcompany/Special Purpose Vehicle (SPV), is not less than 51 per cent. AD Category I banks are permitted to allow remittances for purchase of shares by eligible

persons under this provision irrespective of the method of operationalisation of thescheme i.e where the shares under the scheme are offered directly by the issuingcompany or indirectly through a trust / a Special Purpose Vehicle (SPV) / step downsubsidiary, provided (i) the company issuing the shares effectively, directly orindirectly, holds in the Indian company, whose employees / direct ors are beingoffered shares, not less than 51 per cent of its equity, (ii) the shares under the ESOPScheme are offered by the issuing company globally on a uniform basis, and (iii) anAnnual Return (Annex B) is submitted by the Indian company to the Reserve Bankthrough the AD Category I bank giving details of remittances / beneficiaries, etc.

A person resident in India may transfer by way of sale the shares acquired as statedabove provided that the proceeds thereof are repatriated immediately on rec eiptthereof and in any case not later than 90 days from the date of sale of suchsecurities.

e) Foreign companies are permitted to repurchase the shares issued to residents inIndia under any ESOP Scheme provided (i) the shares were issued in accordancewith the Rules / Regulations framed under Foreign Exchange Management Act,1999, (ii) the shares are being repurchased in terms of the initial offer document, and(iii) An annual return is submitted through the AD Category I bank giving details ofremittances / beneficiaries, etc.

f) In all other cases, not covered by general or special permission, approval of the

Reserve Bank is required to be obtained before acquisition of a foreign security.

C.2 Pledge of a foreign security by a person resident in India

The shares acquired by persons resident in India in accordance with the provisionsof Foreign Exchange Management Act, 1999 or Rules or Regulations madethereunder are allowed to be pledged for obtaining credit facilities in India from anAD Category I bank / Public Financial Institution.

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C.3 General permission in certain cases

Residents are permitted to acquire a foreign security, if it represents

a) qualification shares for becoming a director of a company outside India provided itdoes not exceed 1 per cent of the paid up capital of the overseas company and the

consideration for the acquisition does not exceed USD 20,000 in a calendar year;

b) rights shares provided that the rights shares are being issued by virtue of holdingshares in accordance with the provisions of law for the time being in force;

c) purchase of shares of a JV / WOS abroad of the Indian promoter company by theemployees/directors of Indian promoter company which is engaged in the field ofsoftware where the consideration for purchase does not exceed USD 10,000 or itsequivalent per employee in a block of five calendar years; the shares so acquired donot exceed 5 per cent of the paid -up capital of the JV / WOS outside India; and afterallotment of such shares, the percentage of shares held by the Indian promotercompany, together with shares allotted to its employees is not less than the

percentage of shares held by the Indian promoter company prior to such allotment;and

d) purchase of foreign securities under ADR / GDR linked stock option schemes byresident employees of Indian companies in the knowledge based sectors, includingworking directors provided purchase consideration does not exceed USD 50,000 orits equivalent in a block of five calendar years.

PART - II

Operational Instructions to Authorised Dealer Banks

1.Designated branches

An eligible Indian party making investment in a Joint Venture (JV) / Wholly OwnedSubsidiary (WOS) outside India is required to route all its transactions relating to theinvestment through one branch of an AD Category I bank designated by it in termsof clause (v) of sub regulation 2 of Regulation 6 of the notification. Allcommunications from the Indian parties, to the Reserve Bank, relating to theinvestment outside India should be routed through the same branch of the ADCategory I bank that has been designated by the Indian investor for theinvestment. The designated AD Category I bank while forwarding the request fromtheir customers to the Reserve Bank, should also forward its comments /

recommendations on the request. However, the Indian party may designate differentAD Category I banks / branches of AD Category I banks for different JV / WOSoutside India.For proper follow up, the AD Category I bank is required to maintainparty-wise record in respect of each JV/ WOS.

2. Investments under Regulation 6 of Notification No. FEMA 120/2004-RB datedJuly 7, 2004

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AD Category I banks may allow investments up to the permissible limits on receiptof application in form ODI together with form A -2, duly filled in, from the Indianparty(ies) making investments in a JV/WOS abroad subject to their complying withthe conditions specified in Regulation 6 ofNotification FEMA No.120/RB-2004 datedJuly 7, 2004, as amended from time to time. Investment in financial services shouldalso comply with the norms stipulated at Regulation 7 of the Notification ibid. While

forwarding the report of remittance in respect of investment in financial servicessector, AD Category I banks may certify that prior approvals from the RegulatoryAuthorities concerned in India and abroad have been obtain ed. Before allowing theremittance, AD Category I banks are required to ensure that the necessarydocuments, as prescribed in form ODI, have been submitted and found to be inorder.

3. General procedural instructions

(1) With effect from June 01, 2007, reporting system for overseas investment hasbeen revised. All the earlier forms have been subsumed into one form viz. ODI,comprising of four parts:

Part I - includes the following:

Section A Details of the Indian PartySection B Details of Investment in New ProjectSection C - Details of Investment in Existing ProjectSection D Funding for JV / WOSSection E Declaration by the Indian Party (to be retained by AD Category I bank)Section F - Certificate by the Statutory Auditors of the Indian Party (to be retained by AD Category I b

Part II - Reporting of Remittances

Part III - Annual Performance Report (APR)

Part IV Report on Closure/Disinvestment/Voluntary Liquidation/Winding up of JV /WOS

(2) The revised form is only a rationalisation of the reporting procedure and there isno change or dilution in the existing eligibility criteria / documentation / limits. Soonthese reports will be received on line by Reserve Bank.

(3) AD Category - I banks may take action as under:

a) In cases of Automatic Route Parts I and II of form ODI should be submitted tothe Chief General Manager, Reserve Bank of India, Foreign Exchange Department,Overseas Investment Division, Amar Bldg. 5th floor, SirP. M. Road, Fort, Mumbai400001.

b) In case of Approval Route Part I of form ODI, along with the supportingdocuments, is required to be submitted after scrutiny and with specificrecommendations by the designated AD Category - I bank, at the address mentioned

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above. In case the proposal is approved, Part I will be returned by the Reserve Bankto the AD Category - I bank. After effecting the remittance, the AD Category I bankshould resubmit the same to the Reserve Bank along with Part II of form ODI.

c) In case of disinvestment / closure / winding up / voluntary liquidation under the Automatic Route, in terms ofA. P. (Dir Series) Circular No. 29 dated March 27,

2006, a report should be submitted by the designated AD Ca tegory - I bank, in PartIV of form ODI. In all other cases of disinvestment, an application along with thenecessary supporting documents should be submitted to the Reserve Bank as perthe existing procedure.

(4). In cases where the investment is being made jointly by more than one Indianparty, form ODI is required to be signed jointly by all the investing entities andsubmitted to the designated branch of the AD Category I bank. AD Category Ibanks should forward to the Reserve Bank a consolidated fo rm ODI indicating detailsof each party. The same procedure should be followed where the investment ismade out of the proceeds of ADR / GDR issues of an Indian party in terms ofRegulation 6(5) of the Notification. The Reserve Bank would allot only one U nique

Identification Number to the overseas project.

(5). AD Category I banks should allow remittance towards loan to the JV / WOSand / or issue guarantee to / on behalf of the JV / WOS abroad only after ensuringthat the Indian party has an equity stak e in the JV / WOS.

4. Investments under Regulation 11 ofNotification No. FEMA 120/2004-RBdated July 7, 2004

In terms of Regulation 11 of the Notification , Indian parties are permitted to makedirect investment in JV / WOS abroad by way of capitalisation of exports or otherdues/entitlements like royalties, technical know-how fees, consultancy fees, etc. Insuch cases also, the Indian party is required to submit details of the capitalisation inform ODI to the designated branch of the AD Category I bank. Such investmentsby way of capitalisation are also to be reckoned while computing the cap of 400 percent prescribed in terms of Regulation 6. Further, in cases where the exportproceeds are being capitalised in accordance with the provisions of Regulation 11,the AD Category I banks are required to obtain a custom certified copy of theinvoice as required under Regulation 12(2) and forward it to the Reserve Banktogether with the revised form ODI. Capitalisation of export proceeds or otherentitlements, which are overdue, would require prior approval of the Reserve Bankfor which the Indian parties should make an application in form ODI to the ReserveBank for consideration.

5. Allotment of Unique Identification Number (UIN)

On receipt of the form ODI from the AD Category I bank, the Reserve Bank willallot a Unique Identification Number to each JV or WOS abroad, which is required tobe quoted in all correspondence with th e Reserve Bank. AD Category I banks mayallow additional investment in an existing overseas concern set up by an Indianparty, in terms of Regulation 6 only after the Reserve Bank has allotted necessaryUnique Identification Number to the overseas projec t.

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6. Investment by way of share swap

In the case of investment by way of share swap, AD Category I banks areadditionally required to submit to the Reserve Bank the details of transactions suchas number of shares received / allotted, premium paid / received, brokerage paid /received etc., and also confirmation to the effect that the inward leg of transaction

has been approved by FIPB and the valuation has been done as per laid -downprocedure and that the overseas companys shares are issued / transferred in thename of the Indian investing company. AD Category I bank may also obtain anundertaking from the applicants to the effect that future sale / transfer of shares soacquired by Non-Residents in the Indian company shall be in accordance with theprovisions ofNotification No. FEMA 20/2000-RB dated May 3, 2000 as amendedfrom time to time.

7. Investments under Regulation 9 ofNotification No. FEMA 120/2004-RB datedJuly 7, 2004

In terms of Regulation 9, investment in JV / WOS in certain cases requires prior

approval of the Reserve Bank. AD Category I banks may allow remittances underthese specific approvals granted by the Reserve Bank and report the same to theChief General Manager, Foreign Exchange Department, Central Office, OverseasInvestment Division, Amar Building, 5th floor, Mumbai 400 001 in form ODI.

8. Purchase of foreign securities under ADR / GDR linked Stock OptionScheme

AD Category I banks may make remittances up to USD 50,000 or its equivalent ina block of five calendar years, without the prior approval of the Reserve Bank, forpurchase of foreign securities in the knowledge based sector under the ADR / GDR

linked ESOP

s, after satisfying that the issuing company has followed the relevantguidelines of SEBI / Government.

9. Remittance towards Earnest Money Deposit or Issue of Bid Bond Guarantee

(i)In terms of Regulation 14 of the Notification, AD Category I banks may, on beingapproached by an Indian party which is eligible for investment under Regulation 6,allow remittance towards Earnest Money Deposit (EMD) to the extent eligible afterobtaining Form A2 duly filled in or may issue bid bond guarantee on their behalf forparticipation in bidding or tender procedure for acquisition of a company incorporatedoutside India. On winning the bid, AD banks may remit the acquisition value afterobtaining Form A2 duly filled in and report such remittance (including the amount

initially remitted towards EMD) to the Chief General Manager, Foreign ExchangeDepartment, Central Office, Overseas Investment Division, Amar Building, 5th floor,Mumbai 400 001 in form ODI. AD Category I banks, while permitting remittancetowards EMD should advise the Indian party that in case they are not successful inthe bid, they should ensure that the amount remitted is repatriated in accordancewith Foreign Exchange Management (Realisation, Repatriation & Sur render ofForeign Exchange) Regulations, 2000 (cf. Notification No. FEMA 9/2000-RB dated3rd May 2000) as amended from time to time

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(ii)In cases where an Indian party, after being successful in the bid / tender decidesnot to proceed further with the investment, AD banks should submit full details ofremittance allowed towards EMD / invoked bid bond guarantee, to the Chief GeneralManager, Foreign Exchange Department, Central Office, Overseas InvestmentDivision, Amar Building, 5th floor, Mumbai 400 001.

(iii)In case the Indian party is successful in the bid, but the terms and conditions ofacquisition of a company outside India are not in conformity with the provisions ofRegulations in Part I, or different from those for which approval under sub -regulation(3) was obtained, the Indian entity should obtain approval from the Reserve Bank bysubmitting form ODI.

10. Transfer by way of sale of shares of a JV / WOS outside India

The Indian party should report details of the disinvestment through the AD Category I bank within 30 days of disinvestment in Part IV of the Form ODI as indicated inpara 3 (3) (c) above. Sale proceeds of shares / securities shall be repatriated to Indiaimmediately on receipt thereof and in any case not later than 90 days from the date

of sale of the shares / securities.

11. Verification of evidence of investment

The share certificates or any other document as evidence of investment, whereshare certificates are not issued shall, henceforth, be submitted to and retained bythe designated AD Category I bank, who would be required to monitor the receipt ofsuch documents and satisfy themselves about the bonafides of the documents soreceived. A certificate to this effect should be submitted by the designated ADCategory I bank to the Reserve Bank along with the APR (Part III of Form ODI).

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The researcher found out that in addition to the regulations laid by RBI, there are certain

regulations that are to be undertaken by the company in Australia. Since the company

intends to open the subsidiary office in Melbourne the researcher precisely found out the

details to open an office in Melbourne.

Business Start-Up

Before applying for business migration, one will need to research and plan how to establish

business in Victoria. The application to the Victorian Government for visa sponsorship

requires evidence of this research.

Victoria is well resourced to help people get a business up and running.

Starting a new business

Starting a new business is an exciting but often challenging endeavour. A need to plan and

research carefully is there to give the business its best possible chance at success. Some of

the things to think about include:

y Are you ready to take full responsibility for all aspects of the business?

y Are you experienced at running a business?

y Does your experience include a business like the one you want to start?

y Is your business idea a good one?

y What competition will you face?

y What obstacles will you need to overcome to succeed?

y What costs and profits to do you expect?

y Where will you base your business to increase its chances of success?

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y Who will your customers be? How will you reach them?

y Who will your suppliers be? How will you find them?

y Will you need staff? Where and how will you find good people to join your team?

y Have you taken care of all the legal and regulatory essentials involved in running a business

generally, and running your business particularly?

Business Registration

Register your business name

In Victoria, the names of all business are required to be registered with Consumer Affairs

Victoria, except those that involve a single person trading under their own name, for

example, Jane Citizen. If one adds anything to ones own name, though, one must register it,

for example, Jane Citizen Services.

This is so that a public record can be kept of who owns what businesses. Some banks will

require that a business name be registered before they will open any business accounts for

firm opener.

Business name registration costs $79.50, and then costs $56.80 each year to maintain.

Consumer Affairs Victoria provides information about registering a business name,

including:

y how to register a business name

y what restrictions exist

y what your responsibilities are

y how to update, renew or cancel a registration

y the fees and charges involved.

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Register your business

As well as registering the business name, one should also register the business with the

Australian Business Register.

Once registered, one will be given an Australian Business Number (ABN), which is a unique

number that will identify the party when they deal with the Australian Tax Office and other

bodies.

Although getting an ABN is not compulsory unless one is going to register for the Goods and

Services Tax, many banks, suppliers and customers will not deal with the party unless the

party have one, because it makes their own tax requirements much harder to manage.

Banking & Ta es For Business

Banking

Most banks offer business products, such as business accounts, cheque accounts, business

loans and overdrafts. Products, fees and charges, and interest rates will differ from bank to

bank, so it's worth shopping around before its decided who to approach.

Before approaching the bank, however, one should register the business name and have

obtained an ABN - this will make the process of getting set up much easier.

Ta es

The Australian tax year runs from 1 July to 30 June. Once the party has the Australian

Business Number or ABN, one may need to register with the Australian Tax Office for

certain tax payments. These include:

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y Goods and Services Tax

y Fringe Benefits Tax

y Pay As You Go withholding

y Payroll tax

Victorian Business Centres

One can also telephone the Victorian Business Line within Australia on 13 22 15 or

international on +61 3 9651 8100. Alternatively, or can visit one of the 12 Victorian Business

Centres (VBCs) in Melbourne and across regional Victoria that offer support to small

businesses. These centres offer over-the-counter advice on the following services:

y starting a business, including licensing and registration

y buying an existing business

y referrals to other government and business providers

y organising and distributing local business and economic growth programs

y workshops and seminars on business topics

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Procedure adopted for a Standardized company

Legal Form: Proprietary Company (Pty Ltd)

City: Sydney

Registration Requirements Summary:

Procedure Time to complete Cost to completeC mp e

e

e ASIC F

m

201 App c

Re

s

s

A

s

C mp

y";

ce

c

e

c

p

A s

c mp

y

m e

(ACN)

1

y AU

400

Re

s

e

ABN w

h

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A s

T x

ce

(AT )

1 y N ch

e

Registration Requirements Details

PROCEDURE 1

Comment:

The company must complete and submit form 201 Application for Registration as an Australian

company ,along with the prescribed fee of AUD 400 when registering a proprietary limited company.

To complete the application, the company must indicate the Australian state or territory in which it

will be registered and whether it will rely entirely on the replaceable rules or a constitution. The

company should also provide the following details: the proposed corporate name (if any)*, the

corporate type and class, the location of the registered office, principal place of business in

Australia,the identity of the ultimate holding company (known as the parent company),

officeholders (of which on director must be an Australian resident, and, if any are appointed,

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one company secretary must be an Australian resident), the share structure, and the shareholders

and their shareholdings. A company may adopt its own constitution with the consent of all

company members. Moreover, the applicant, a company member, or a person who has consented

to become a director or secretary or by the applications agent with the requisite authority must

sign form 201.Once form 201 has been completed and the directors and secretary (if any) have

consented to be officeholders, the form 201 can be lodged with the Australian Securities and

Investment Commission (ASIC). Before submitting ASIC form 201, applicants should check

with ASIC on the availability of their proposed company name.

Once the 201 form is lodged with ASIC electronically and the companys name is acceptable an

Australian Company Number (ACN) becomes available, the ASIC provides the company with an

Australian Company Number (ACN), registers the company on the ASIC database and issue

the company a certificate of registration electronically and a copy will be mailed.

PROCEDURE 2

Comment:

this procedure is required under the Income Tax Assesment

Act 1936 and a new tax system ( Goods and Services Tax) act of 1999.

Depending on the company circumstances and location, it must comply with different

taxation requirements:

- If the annual company turnover is AUD$75,000 or more, the company must register for

Goods and Services Tax (GST) by obtaining an 11-digit Australian Business Number (ABN).

The annual company turnover represents its gross business income (not its profit). Companies

with lower annual turnover may also choose to register for the Goods and Services Tax.

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An application for an ABN can be submitted electronically at the Business Entry Point,

www.abr.business.gov.au. Otherwise, the application may be submitted by hard copy to the (ATO).

If electronic submission is successful, the applicant will be provided with an ABN at the end of the

Internet session. The ATO will also mail the ABN within 28 days of receipt of the application.

-The company must deduct tax from employee pay, provide payment summaries, contribute to

employee superannuation, and report and issue payments to the ATO. Companies may also register

for Pay As You Go (PAYG) at www.abr.gov.au. Otherwise, they may register with the ATO by

postal mail or phone or through a tax agent. State and territory taxes (e.g., stamp duty, payroll

tax, and land tax) may also be imposed, with requirements differing according to company

location.

- Companies with annual turnover of AUD$75,000 or more must register for an ABN. Failure to

do so will result in GST being levied on all company sales since the required date of registration

even if the sale price of any goods or services has not been grossed up to include the tax.

Furthermore, the company may incur penalties and interest charges for any overdue payments.

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Inference drawn on exports of food products

Indias Exports of food products to Australia(in %age)

From the above data it can be inferred thatthe Australian marketis yetto be exploited by the

Indian exporters as the export contribution isjust 3%. Itis clearly a lucrative marketthat can

be exploited. Therefore the company has bright chances to broaden its export activities in

Australia.

The products that the company has specified is a list of 26 items that comes under the

category of processed food products to be exported to Australia. In order to understand the

existing trend oftrade and also the statistics regarding the exports of food products by India

and the imports by Australia it was a necessary for the researcher to availthe data from the

concerned organisation and the same was obtained from APEDA.

0

0.5

1

1.5

2

2.5

3

1990-91 2005-06 2006-07

2

3 3

1990-91

2005-06

2006-07

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The following statistics were obtained:-

Indias principal export destinations of 2009 were as follows:-

Name of the country Rank Percentage of Total E ports

United Arab Emirates 1 12.6%

United States 2 11.1%

China 3 6%

Australia 29 0.8%

Indias goods and services contribution to the Indian GDP has been increasing

year on year. Thus there is a scope for the company to increase its exports to

Australia.

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FINDINGS, CONCLUSION AND RECOMMENDATIONS

FINDINGS

The research helped the researcher in discovering certain new findings. Some of them are

being listed as follows:-

y India and Australia have a good scope of trade with each other

y Since the GDP of India is growing it provides a green signal for the exports to other

countries.

y There have been fewer exports of chemicals to Australia as compared to other

countries from India in the past 3 years.

y Exports of food products under the processed food category are going to increase the

profits of the company.

y Since imports from India in Australia is 1.2% as of 2009, therefore more of exports to

Australia will not only benefit the company but will also help in the development of

the economy of the nation.

y The study finds that a comprehensive FTA covering goods, services and investment

between Australia and India could lead to a substantial increase in the trade in goods,

and that there is further potential in services trade, and considerable scope for

enhanced investment links.

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CONCLUSION

Strike the iron when it is hot. As the saying goes, similar is the case for Indian exports.

Since the exports from India are increasing at a good pace it will be profitable for Zen

Intratrade Pvt. Ltd. to increase the exports of chemicals and food products from India to other

countries including Australia (which is the country in which the company has already

planned to start business.). The plan of company opening an office in Australia is going to

yield sweet fruits for the company in future as the Indo Aus free trade pact is going to open

more doors of trade between India and Australia.

Thus it can be concluded that the company has a bright scope of growth in future by

expansion of it trade activities and exports to Australia.

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RECOMMENDATIONS

Australias trade with India

Since the trend of exports and imports between India and Australia clearly reveal that

Indias exports have been increasing at a good pace, therefore the company has a good

scope of exports of food products to Australia.

The GDP growth rate of India as of now is 7.4% as compared to the expected growth

rate of 8%. Therefore it can be concluded that there is a possibility of more of Indian

exports.

Since company is a new player in the export market therefore it should try to target

those countries (in addition to Australia) where the company can incur more profit

The two golden rules for successful development of this export sector are to ensure

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consistency in supply and provide recorded and demonstrated traceability of products

Thus, procurement strategies are the most crucial in strategy development.

Procurement strategy should be designed based on financial resources, managerial

skills and entrepreneurial capacity

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Appendi

www.zenintratrade.com

www.infodriveindia.com

www.daff.gov.au

www.austrade.gov.au

www.google.com

www.rbi.org.in

www.wikipedia.org

www.utsavaustralia.in

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