M&As abroad may get boost

In addition, this has also forced Indian companies to structure deals through multiple routes and investment arms abroad to invest over and above the permissible limit.

“Any investment above the limit required multiple permissions, leading to delays in finalising the deals and companies from other countries gaining a lead over Indian companies,” a senior government official said. “In addition, Indian companies are now in a position to raise funds easily to finance M&As abroad. Any sort of cap on investments abroad will only be counterproductive.”

Besides, partnership firms registered as per the provisions of the Indian Partnership Act, 1932, can make overseas investments not exceeding 200 per cent of their net worth. Sources said the government was likely to raise this limit to 300 per cent of the net worth of such companies.

According to analysts, with Indian companies looking to acquire overseas ventures to spread their global footprint, such a move would come as a major boost.

In addition, the government has been freeing up the rules governing overseas investments by Indian companies. It recently hiked the limit on overseas portfolio investment by Indian companies from 35 per cent of their net worth to 50 per cent. It has also allowed mutual funds to make an aggregate investment to the tune of $5 billion in overseas shores, from an earlier cap of $4 billion.

According to a joint finding by two European investment bodies from France and Germany (Invest in France and Invest in Germany), the FDI outflow from India to the European Union can cross the $25-billion mark this year from an estimated $16 billion in 2006.