FDI route and sector restrictions

Describe the actual business

Prepare a short activity statement using contracts, customer journeys and revenue streams. Separate manufacturing, trading, marketplace operations and regulated services where the company conducts more than one activity. A broad incorporation object or a technology label is not a sufficient transaction description.

For example, a company selling its own inventory online and a company operating a marketplace have different operating models. Document who owns the goods, sets prices, invoices customers and bears returns before selecting the relevant policy entry.

Build the route assessment

DPIIT publishes the consolidated FDI policy and subsequent policy material. Read the applicable sector entry together with later amendments and the operative FEMA rules for the transaction date. An older consolidated table should not be treated as the complete current rule.

The RBI Master Direction on Foreign Investment in India, updated through 15 June 2026, explains the framework alongside the Non-Debt Instruments Rules and separate payment and reporting regulations. Read these instruments together: the direction states that the relevant FEMA notifications prevail if they conflict with its guidance. Permissions under other laws remain separate.

Distinguish the permitted foreign investment level, the automatic or government approval route, and the conditions attached to that route. Automatic-route eligibility does not remove licensing, pricing, reporting or operating conditions.

• Actual activities and the policy entries considered.
• Applicable cap and how the proposed investment is counted.
• Entry route and any transaction-specific approval requirement.
• Conditions affecting ownership, control or the business model.
• Effective dates, amendment references and open interpretation points.

Trace the investor and ownership chain

Collect the direct investor’s incorporation and residence information, ownership chart and beneficial ownership evidence. Review special investor-origin and beneficial-ownership restrictions under the current instruments; do not determine eligibility solely from the country of the immediate holding company.

Record any changes between signing and closing. A substituted investment vehicle, new ultimate owner or amended control arrangement can require the assessment to be revisited.

Review instrument and control terms

Identify whether the proposed funding is an eligible equity instrument, debt or another arrangement. Convertible terms, optionality, return assurances and repayment provisions need their own classification review. A commercial description such as investment or preference capital does not settle the regulatory treatment.

Compare the shareholder agreement, constitutional documents and side letters. List board appointment rights, reserved matters and other control provisions so the adviser can assess the complete arrangement.

Assemble the decision file

• Activity note, licences and material customer or supplier contracts.
• Current and proposed capitalisation tables, including relevant indirect holdings.
• Investor identity, residence and beneficial ownership records.
• Term sheet, instrument terms, shareholder agreement and side letters.
• Valuation support, proposed consideration and payment schedule.
• Existing investment approvals and any conditions still in force.
• Proposed use of funds and downstream investment plans.

Turn the assessment into closing conditions

Create a responsibility table for each approval, licence, document and filing, with an owner and evidence of completion. Where prior approval is needed, reflect that dependency in the transaction timetable and funding instructions.

Avoid treating a bank’s receipt of money or a portal acknowledgement as confirmation that every investment condition has been satisfied. Keep the substantive route assessment alongside the payment and reporting records.

Maintain the position after investment

Assess changes in activity, ownership, control and downstream holdings before implementing them. Retain the version of the rules used at closing and a record of subsequent changes that affect the business.

Kosha.Services can help organise the activity and ownership evidence, coordinate the route review and translate the conclusions into a closing and reporting checklist. Bring unresolved facts into the review early rather than relying on a generic sector percentage.