Agarwal Enterprises Ltd. (AEL) is a resident company in India for the last 15 years. The company is operating in various sectors e.g. power, infrastructure, ports, oil, telecommunications and IT etc. Now, the company is

According to Foreign Exchange Management (Overseas Investment) Rules, 2022 read with Foreign Exchange Management (Overseas Investment) Regulations, 2022 & Foreign Exchange Management (Overseas Investment) Directions, 2022: The total financial commitment made by an Indian entity in all the foreign entities taken together at the time of undertaking such commitment shall not exceed 400 percent of its net worth as on the date of the last audited balance sheet or as directed by the Reserve Bank, in consultation with Central Government from time to time. Financial commitment by an Indian entity, exceeding USD 1 (one) billion (or its equivalent) in a financial year shall require prior approval of the Reserve Bank even when the total financial commitment of the Indian entity is within the eligible limit under the automatic route. It may be noted that "net worth" shall have the same meaning as assigned to it in clause (57) of section 2 of the Companies Act, 2013, means the aggregate value of the paid-up share capital and all reserves created out of the profits, securities premium account and debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation. In the given case, Agarwal Enterprises Limited (AEL) is planning to make an investment of ₹10,000 crore which is equivalent to USD 1.25 billion (₹10,000/₹80). The net worth of AEL is ₹2,000 crore + ₹1,000 crore = ₹3,000 crore. The eligible limit of investment under the automatic route is 400% of the net worth i.e. ₹3,000 crore × 400% = ₹12,000 crore which is equivalent to ₹12,000 crore / ₹80 = USD 1.5 billion. However, the proposed investment is exceeding the limit of USD 1 billion i.e. USD 1.25 billion. Therefore, the company cannot make investment under automatic route.