Foreign companies expanding to India often ask whether they can own 100% of an Indian subsidiary?
In most sectors, India allows 100% foreign direct investment (FDI) under the automatic route, meaning foreign companies can establish wholly owned subsidiaries without government approval.
However, certain sectors still require government approval or have investment limits.
This guide explains the rules governing foreign ownership of companies in India.
What is Foreign Direct Investment (FDI)?
Foreign Direct Investment refers to investments made by foreign companies or individuals in Indian businesses.
FDI in India is governed by:
• FEMA regulations
• RBI guidelines
• Consolidated FDI policy issued by the Government of India
Automatic Route vs Approval Route
India allows foreign investment through two routes.
Automatic Route
Foreign investment does not require prior approval from the government.
Most sectors fall under this route.
Examples include:
• IT and technology
• consulting services
• trading and distribution
• manufacturing
• research and development
Government Approval Route
Certain sectors require prior approval.
Examples include:
• defense manufacturing
• telecom infrastructure (above certain limits)
• media and broadcasting
Can Foreign Companies Own 100% of an Indian Company?
Yes.
In most sectors, foreign companies can establish a wholly owned subsidiary in India with 100% ownership.
This structure is commonly used by companies expanding into India.
Compliance Requirements for Foreign Investment
After incorporation, companies must complete certain regulatory filings.
Examples include:
• reporting foreign investment to RBI
• filing FCGPR forms
• valuation of shares issued to the parent company
These filings ensure the investment complies with FEMA regulations.
Typical Process for Setting Up a Foreign-Owned Subsidiary
1️⃣ Incorporate Indian private limited company
2️⃣ Open bank account
3️⃣ Parent company remits capital investment
4️⃣ Shares issued to parent company
5️⃣ RBI reporting through FCGPR