ADVERTISEMENT

India Amends Rules to Curb ‘Opportunistic’ Foreign Takeovers

India Amends Rules to Curb ‘Opportunistic’ Foreign Takeovers

(Bloomberg) --

India put curbs on investments in its companies from neighboring nations including China, seeking to cut the risk of opportunistic takeovers as the coronavirus outbreak drives down valuations.

A foreign investor from any country that shares a land border with India will now only be able to invest with government approval. At present, such restrictions apply only to FDI from Bangladesh and Pakistan. India shares its land border with seven countries, including China.

“The government has reviewed the extant foreign direct investment policy for curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic,” the trade ministry said in a note dated April 17.

Any change in beneficial ownership will also require government approval. The decision will take effect from the date of notification under the Foreign Exchange Management Act, the government said.

The notification “primarily intends to stem any attempts by Chinese firms to take control of Indian firms which have been affected and weakened by COVID related lockdowns,” said Atul Pandey, Partner, Khaitan & Co. “The intention of the government is clear in wanting to evaluate Chinese investments on a case to case basis. “

Earlier this month, India’s biggest mortgage lender Housing Development Finance Corp. said the People’s Bank of China raised its stake in the company to just over 1%. HDFC’s shares plunged 25% last month amid the brutal sell-off in global markets on concerns about the spreading coronavirus pandemic.

©2020 Bloomberg L.P.