10/09/2015

FDIvs.FIIvs.FPIChiranjivKumar

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FDI VS. FII VS. FPI

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POSTED BY: CHIRANJIV KUMAR

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For the sake of simplicity, home country is assumed to be India.

You are a businessman living in USA and you have idle funds which you want to invest then you have 3 ways to do
it.
If you have large capital base then you can try opening a business by acquiring a business in India or setting up
a new unit. (FDI)
If you have normal capital base and you dont have time to look after the business but still want to have the
controlling interest in India then you can choose to acquire equity of company in India. Say 20-30%. (FPI)
If you already have a good portfolio but you want to diversify investments, you may consider investing in
securities like debentures, bonds, shares or real property etc. in India. (FII)

FDI
Shiro
Bhao Wow wow, Bhao wow

A Foreign direct investment (FDI) is a controlling ownership in a business enterprise in one country by an
entity based in another country.
Explanation
In simple words, it is the investment by a foreign company in India in controlling interest
which means setting up businesses and entering into joint venture, by mergers and acquisitions, building
new facilities, reinvesting profits earned from overseas operations and intra-company loans. The name also
suggests that this is direct investment which means an investment in primary market. The motive is to start
up a business in India.

FPI
A Foreign portfolio investment is an investment in equity by one country in another country.
Explanation Investment by a foreign country in India in equity. The motive is to ensure a controlling
interest in India without investing huge amount as in FDI. It also ensures flexibility in entry and exit.

FII
A Foreigninstitutional investment (FII) is investment in securities, real property and other investment assets by one
country in another country.
Explanation It is the investment by a foreign company in India in secondary market of India. Investors include
mutual fund companies, hedge fund companies etc. Motive is not to take controlling interest of the company but to
diversify portfolio ensuring hedging, high returns with quick entry and exit.

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