Monday, June 27, 2016

Key features of FDI investment in Pharma units

Key features of FDI investment in Pharma units:

1) 100% FDI is permitted to Greenfield thru automatic route while investment in Brownfield can be made only after going thru approval route.

2) However, 100% automatic route investment is allowed for Pharma unit manufacturing medical device. That means 100% automatic route is applicable for both Greenfield and Brownfield units for manufacturing medical devices.

3) Declaration needs to be submitted along with application to FIPB by investor(s) and brownfield investee:

Content of declaration:

a) Mandatory to list all the agreements executed between both the parties apart from Shareholder agreement.

b) To give declaration that none of agreements contain any non compete clause

c) Undertaking by both the parties, pursuant to the application made, that both the parties will submit the copy any agreement executed in future to the FIPB.

4) Government may incorporate certain important restriction / clauses while granting approval to brownfield units.

5) Why automatic route for Greenfield and not for Brownfield ?

a) To promote set up of new industries and employment opportunity.

b) To ease the formalities and quick investment in business. As approval route has got it's own timeline.

c) FDI monies are easy to procure compare to domestic funds.

d) Greenfield create fresh production set up, fresh employment and this increase in economics, whereas, Brownfield is purchase / expansion of existing production capacity, comparatively lesser in number than Greenfield.

Courtesy : Mr Asish Baid 

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