Yes. A foreign company can acquire an Indian business, but the transaction must comply with India’s foreign-investment, company, competition and—where the target is listed—securities laws. Whether prior Government or regulatory approval is required depends on the target’s sector, the buyer’s ownership structure, the size and form of the transaction, and whether control of the Indian business will change.
A foreign buyer should therefore complete the regulatory analysis before signing an unconditional acquisition agreement or transferring funds, rather than treating FEMA and FDI compliance as a post-closing formality.
Foreign businesses considering a wider India presence may also find Edvisars’ guide on starting a private limited company in India as a foreign founder useful.
How can a foreign company acquire an Indian business?
There is no single legal structure for acquiring an Indian business.
Depending on the commercial objective, a foreign buyer may acquire:
shares of an Indian company;
control over an Indian company;
shares through an Indian acquisition vehicle or subsidiary;
particular assets or a business undertaking; or
a business through a merger, amalgamation or other approved restructuring.
The correct structure matters because an acquisition of shares is treated differently from an acquisition of assets, and a listed-company takeover involves requirements that generally do not apply to an unlisted private company.
For foreign investment into an Indian company, the principal framework is the Foreign Exchange Management Act, 1999 (FEMA) together with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, as amended.
The RBI’s Foreign Investment Master Direction confirms that foreign investment in Indian equity instruments may fall under either the Automatic Route or the Government Route, depending on the sector and applicable conditions.
RBI Master Direction – Foreign Investment in India
Does every foreign acquisition require Government approval?
No. Many acquisitions can proceed without prior Government approval, but the target’s exact business activity must first be checked against the applicable FDI rules.
Under the Automatic Route, prior Government approval is generally unnecessary where the proposed investment is permitted in the sector, remains within the applicable sectoral cap and satisfies all relevant conditions.
Under the Government Route, approval must be obtained before making the investment.
The RBI also states that sectors not specifically listed under Schedule I of the NDI Rules may generally permit up to 100% foreign investment under the Automatic Route, provided the activity is not prohibited and no special rule applies. Financial-services activities require separate consideration.
The first question in any acquisition should therefore be:
What business does the Indian target actually conduct?
The answer should come from its real operations, licences, revenue streams and contracts—not merely the activity described in its incorporation documents.
A company described commercially as a “technology company”, for example, could still be carrying on a regulated activity involving lending, payments, insurance, telecom, defence, broadcasting or another sector with special foreign-investment conditions.
The current DPIIT FDI materials should therefore be reviewed before the deal structure is finalised.
DPIIT – Foreign Direct Investment Policy Resources
Does the nationality or ownership of the foreign buyer matter?
Yes. The identity of the immediate acquiring company is not always enough—the ownership and control behind the foreign investor may also have to be examined.
This is particularly important for investments connected with countries sharing a land border with India.
DPIIT issued Press Note No. 2 (2026 Series) dated 15 March 2026, revising the framework originally introduced through Press Note 3 of 2020.
Under the revised policy, an entity or citizen of a country sharing a land border with India, or an investment where the relevant beneficial ownership falls within the prescribed restriction, is subject to the Government Route. A subsequent transfer that causes beneficial ownership to fall within that restriction can also require prior Government approval.
For investor entities incorporated outside a land-border country, the 2026 framework links the beneficial-ownership analysis to the Prevention of Money-laundering Act and Rules and also considers whether land-border-country persons or entities can exercise control over the investor or ultimate effective control over the Indian investee entity.
The revised framework also introduces additional reporting for certain investments involving direct or indirect land-border-country ownership even where prior Government approval is not otherwise required.
DPIIT Press Note No. 2 (2026 Series)
The practical lesson is straightforward: review the complete ownership and control chain of the foreign purchaser before concluding that the Automatic Route is available.
Are there sectors where foreign investment is restricted or prohibited?
Yes. Indian FDI law contains prohibited activities as well as sectors subject to caps, Government approval or operating conditions.
The applicable position must be checked against the current NDI Rules and FDI policy at the time of the transaction.
Examples of prohibited or specially restricted activities include certain gambling and lottery businesses and activities that are not open to private-sector investment. Other industries—including banking, insurance, telecom, defence, broadcasting and various financial services—operate under sector-specific rules.
The buyer should therefore prepare an FDI eligibility note covering:
the target’s actual activities;
applicable sectoral cap;
Automatic or Government Route;
licence conditions;
ownership and control requirements;
beneficial ownership of the investor; and
whether acquisition of control changes the regulatory position.
For a broader India-entry perspective, see Edvisars’ India Entry & Cross-Border Advisory practice.
What legal due diligence should be completed before the acquisition?
A foreign buyer should conduct legal due diligence before becoming unconditionally committed to the transaction.
At a minimum, the review should normally cover:
corporate ownership and capital structure;
statutory filings and corporate authorisations;
material commercial contracts;
loans, security interests and guarantees;
regulatory licences and approvals;
foreign-investment history and FEMA compliance;
litigation, arbitration and regulatory proceedings;
employment liabilities;
intellectual-property ownership;
material property rights;
data-protection and technology issues where relevant;
tax exposures with the appropriate tax advisers; and
change-of-control clauses in important contracts and licences.
A purchaser acquiring shares generally inherits the company together with its historical liabilities. That makes historic compliance particularly important.
An asset acquisition may allow the buyer to select particular assets and liabilities, but it creates its own transfer, consent, employment, tax, licence, property and contractual issues.
Edvisars lists legal due diligence and corporate advisory among its business-law capabilities.
Do FEMA pricing rules apply when shares are acquired from an Indian shareholder?
Usually yes where equity instruments move between a person resident in India and a person resident outside India.
The RBI Foreign Investment Master Direction contains specific pricing rules for the issue and transfer of Indian equity instruments.
The applicable method depends on factors including whether the company is listed or unlisted and whether SEBI pricing rules separately apply.
For relevant unlisted-company transactions, valuation therefore should not be left until closing. The transaction documents, valuation certificate and consideration mechanics should be coordinated before funds move.
The RBI also currently requires an eligible valuation certificate used for its pricing framework to be not more than 90 days old on the date of investment, except where the price is determined under applicable SEBI guidelines.
Cross-border acquisition agreements should also be reviewed carefully where they contain:
deferred consideration;
escrow arrangements;
holdbacks;
indemnity retention mechanisms; or
earn-out style payments.
The RBI framework currently permits specified deferred-payment, escrow and indemnification structures, subject to prescribed limits and conditions.
These provisions should be checked against the transaction structure rather than importing payment mechanisms from an overseas acquisition agreement without an India-specific review.
Is RBI reporting required after a share acquisition?
Cross-border share transfers can trigger FEMA reporting obligations even where prior Government approval was not required.
A resident-to-non-resident acquisition of Indian equity instruments must comply with the applicable documentation, pricing and reporting framework.
Depending on the transaction, filings such as Form FC-TRS may be relevant for transfers, while FC-GPR generally relates to qualifying fresh issues of equity instruments by the Indian company to a person resident outside India.
The correct filing depends on whether the buyer is acquiring existing shares or subscribing for new securities.
The RBI Master Direction expressly requires compliance with reporting requirements in cross-border transfers and in qualifying merger or restructuring situations.
The authorised dealer bank should therefore be involved sufficiently early in the transaction, especially where consideration, escrow or closing mechanics are complex.
Does the Competition Commission of India need to approve the acquisition?
Potentially. Larger transactions should be tested under Sections 5 and 6 of the Competition Act, 2002 before closing.
A transaction may constitute a notifiable “combination” where the applicable jurisdictional thresholds are met and no exemption applies.
CCI explains that acquisitions of control, shares, voting rights or assets—as well as mergers and amalgamations—can fall within the combinations framework.
A particularly important development is India’s deal value threshold.
Transactions with a value exceeding ₹2,000 crore may require notification where the target has substantial business operations in India, even where the traditional asset or turnover analysis would not otherwise produce the same result.
The test is particularly important for technology and digital businesses whose market value may be substantial even where conventional asset or turnover figures are comparatively low.
CCI – Regulation of Combinations
Can the parties close before CCI approval?
Generally not where the transaction is a notifiable combination, subject to statutory exceptions.
India operates a suspensory merger-control regime. A notifiable transaction normally cannot be implemented before CCI clearance or the applicable statutory process has run its course.
This means the parties must also be careful about “gun jumping”—effectively implementing parts of the transaction before the required approval.
Examples of risk can include giving the buyer premature control over ordinary business decisions or exchanging competitively sensitive information without appropriate safeguards.
CCI itself recommends caution during due diligence and integration planning and refers to the possible use of limited clean teams when sensitive competitive information must be reviewed.
This should be considered early where the buyer and target compete with each other.
What changes if the Indian target is listed?
A listed-company acquisition may additionally trigger SEBI’s takeover regulations.
The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, commonly called the Takeover Code, govern direct and indirect acquisitions of shares, voting rights and control over listed target companies.
The Regulations were last amended on 5 December 2025 as reflected in SEBI’s current consolidated version.
Among other triggers, Regulation 3(1) addresses acquisitions reaching the 25% voting-right threshold, while Regulation 4 separately addresses acquisition of control.
An acquisition of control may therefore trigger an open-offer obligation even where the percentage of shares being acquired might otherwise appear comparatively small.
Where triggered, the mandatory open offer is ordinarily for at least 26% of the target’s expanded voting share capital, subject to the detailed Regulations and applicable exceptions. Recent SEBI offer documentation illustrates the operation of these requirements.
SEBI – Substantial Acquisition of Shares and Takeovers Regulations, 2011
For a listed target, FEMA, SEBI and competition-law analysis should be coordinated rather than undertaken separately at the end of the deal.
Can a foreign company acquire an Indian business through a merger?
Potentially yes, but cross-border and domestic restructuring routes require separate analysis.
The Companies Act, 2013 contains the framework for schemes of compromise, arrangement, merger and amalgamation.
The RBI Foreign Investment Master Direction also recognises qualifying mergers, demergers and amalgamations involving Indian companies, subject to compliance with:
applicable FDI entry routes;
sectoral caps;
investment limits;
foreign-investment conditions;
necessary Government approval; and
FEMA reporting.
Where a listed Indian company is involved, SEBI requirements may apply in addition.
A merger should therefore not be selected merely because it appears commercially convenient. NCLT, FEMA, tax, competition and securities-law implications should first be compared with a conventional share acquisition.
What documents are normally required in a foreign acquisition?
The exact transaction set depends on the structure, but a share acquisition commonly involves:
term sheet or letter of intent;
confidentiality agreement;
legal due diligence report;
share purchase agreement;
disclosure letter;
shareholders’ agreement where the seller remains involved;
valuation documents;
corporate approvals;
regulatory approvals;
lender and contractual consents;
beneficial-ownership documentation;
closing certificates;
share-transfer documentation; and
FEMA and other post-closing filings.
The acquisition agreement should clearly identify which regulatory approvals are conditions precedent to closing.
The parties should avoid wording that accidentally transfers control before a mandatory approval has been obtained.
What are the most common legal mistakes in foreign acquisitions of Indian companies?
Several problems arise repeatedly.
Assuming that incorporation country alone decides FDI eligibility.
The buyer’s beneficial ownership and control structure may also matter.
Checking the FDI cap but ignoring the conditions attached to the sector.
Permission for foreign investment does not necessarily mean unrestricted foreign control.
Signing before testing CCI thresholds.
Competition-law filing requirements can materially affect the closing timetable.
Using a foreign valuation or payment mechanism without checking FEMA.
Cross-border share pricing, deferred consideration and escrow arrangements operate within a specific Indian regulatory framework.
Treating due diligence as a document checklist.
The important issue is whether the target legally owns what the buyer believes it is acquiring and whether any undisclosed liabilities travel with the business.
Ignoring change-of-control clauses.
Important customer, lender, lease, licence or technology agreements may require consent when ownership or control changes.
Assuming “automatic route” means “no compliance”.
Automatic-route transactions can still require compliance with sectoral conditions, pricing rules, banking procedures and reporting requirements.
Foreign buyer’s pre-acquisition checklist
Before committing to an Indian acquisition, confirm:
What exactly is being acquired—shares, assets, control or an undertaking?
What business activities does the target actually conduct?
Is foreign investment permitted in those activities?
What is the applicable sectoral cap?
Is the investment under the Automatic or Government Route?
Has the buyer’s ultimate ownership and control structure been reviewed?
Do the 2026 land-border investment rules apply?
Has a full legal and regulatory due diligence been completed?
Do FEMA pricing rules apply?
Is a compliant valuation required?
Is CCI notification required under the financial or deal-value thresholds?
Does the transaction involve a listed target and therefore SEBI takeover rules?
Are sector regulator approvals required?
Are lender or contractual change-of-control consents needed?
Have the correct FEMA reporting responsibilities been allocated?
Do the acquisition documents make mandatory approvals conditions precedent?
Frequently asked questions
Can a foreign company buy 100% of an Indian company?
Yes, where 100% foreign investment is permitted for the target’s business and all applicable entry-route, sectoral and other conditions are satisfied. Some sectors impose lower caps or require Government approval.
Does every foreign acquisition require RBI approval?
No. Prior RBI approval is not a universal requirement for every foreign acquisition. The transaction must instead be tested under the current FEMA and NDI framework, including applicable Government-route requirements, sectoral rules, pricing and reporting obligations.
Can a foreign company buy shares from an Indian promoter?
Yes, subject to the applicable FDI eligibility, sectoral restrictions, pricing rules, documentation and FEMA reporting requirements.
Can a foreign company acquire control without buying 51%?
Potentially yes. Control is not determined solely by majority shareholding. Rights relating to appointment of directors, management or policy decisions and contractual governance arrangements can also be relevant. The RBI foreign-investment framework expressly recognises these forms of control.
Is CCI approval required for every acquisition?
No. Only transactions falling within the applicable combinations framework require notification, subject to the statutory thresholds, deal-value rules and available exemptions.
Does buying less than 25% always avoid competition-law approval?
No. A percentage below 25% does not automatically exclude CCI jurisdiction. The transaction structure, acquisition of control, jurisdictional thresholds and applicable exemptions must still be considered.
Does buying less than 25% of a listed company avoid the Takeover Code?
Not necessarily. Although the 25% threshold is important under Regulation 3, acquisition of control is independently relevant under Regulation 4.
Can the purchase price be paid in instalments?
Certain deferred-consideration and escrow arrangements are permitted under the FEMA framework, subject to prescribed conditions. The proposed payment structure should therefore be checked before it is written into the acquisition agreement.
Should legal due diligence happen before or after signing?
Ideally, material legal due diligence should be completed before the buyer becomes unconditionally committed. Any unresolved regulatory approvals or significant risks should then be addressed through conditions precedent, specific indemnities, price adjustments or other transaction protections.
The practical takeaway
A foreign company can legally acquire an Indian business, but “Can we buy it?” and “How should we buy it?” are different questions.
The safest sequence is to identify the target’s actual activities, establish the FDI route and foreign-ownership limits, investigate the buyer’s ownership structure, conduct legal due diligence, check FEMA pricing and payment rules, test CCI thresholds, examine SEBI requirements where relevant, and only then finalise the acquisition documents and closing process.
Cross-border acquisitions are most vulnerable when regulatory analysis is postponed until after the commercial terms have already been agreed.
For businesses considering an acquisition or wider Indian market entry, see Edvisars’ India Entry & Cross-Border and Corporate Advisory services and its guide on company registration in India for foreign founders.
