ADN Ltd. an Indian Listed Company in real estate segment has participated in International Competitive Bidding process and successfully selected as L1 bidder for development of Air Linkage Bridge over the Arabian Sea for

CS Professional · Secretarial Audit, Compliance Management and Due Diligence · PYQS · June 2021
ADN Ltd. an Indian Listed Company in real estate segment has participated in International Competitive Bidding process and successfully selected as L1 bidder for development of Air Linkage Bridge over the Arabian Sea for Saudi Arabian Country. The total contract value is USD 40 Million and tenure of the contract is 3 years. As per audited financial statements for financial year 2020-21, the networth of ADN Ltd. is ₹15,000 Crore (USD 2000 Million, assume ₹75 per dollar). ADN Ltd. is willing to complete the project in Joint Venture with AL-Habibi inc. a Dubai based Company in real estate business since last 25 years by overseas investment after entering into a Joint Venture Agreement. The Statutory Auditor of the Company makes the statement that Indian Company is prohibited from making investment in a foreign entity engaged in real estate business. In this case, as a Company Secretary of the Company, answer the following: What are the maximum investments permissible in this case?

Answer & Explanation:

The investment (total financial commitment) in overseas Joint Ventures/Wholly Owned Subsidiaries (WOS) should not exceed 400% of the net worth as on the date of last audited Balance Sheet of Indian Party. In the present case, ADN Ltd. can make investment upto USD 8000 million i.e. ₹60000 Crore.

Topics: Foreign Exchange Management Act (FEMA)

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