More Indian companies than ever are looking outward. Buying a business in another country used to feel like something only the biggest names could do. Today, a mid-sized firm in Pune or a growing brand in Ahmedabad can seriously plan an overseas acquisition — as long as they understand the rules and plan the money side carefully.

If you’re thinking about acquiring a foreign business, here’s what the journey actually looks like, in plain language.

Why Indian companies buy businesses abroad

The reasons are usually practical. A company might want a foothold in a new market, access to technology it doesn’t have at home, a recognised brand, or simply a faster way to grow than building from scratch. Buying an existing business gives you customers, staff, and revenue from day one — instead of starting at zero.

For many Indian firms, an overseas acquisition is also about credibility. Owning a company in the UK, the UAE, or the US can open doors that years of exporting never could.

The rulebook: how India regulates overseas acquisitions

When an Indian company puts money into a foreign business, it’s treated as Overseas Direct Investment, usually shortened to ODI. This is controlled by India’s foreign exchange law (FEMA) and, more specifically, the Overseas Investment Rules and Regulations that came into force in August 2022. The Reserve Bank of India (RBI) keeps this framework updated through its master directions.

In simple terms, ODI means you’re buying real ownership and influence — typically 10% or more of a foreign company, or enough to give you control. If you’re just buying a small stake with no control, that’s treated differently, as portfolio investment.

The two routes: automatic and approval

Most acquisitions happen through the automatic route, which means you don’t need to ask the RBI for permission in advance. You work through your bank (called an Authorised Dealer bank), file the right forms, and proceed.

There’s a ceiling to remember: the total financial commitment an Indian company makes abroad can’t cross 400% of its net worth, based on the last audited balance sheet. That’s a generous limit for most businesses, but it’s the number your finance team should check first.

If your deal crosses the limits, touches a sensitive sector, or has an unusual structure, you go through the approval route and seek a green light from the RBI (and sometimes the central government) before moving money.

What you can and can’t do

The rules allow an Indian company to acquire a foreign business in several ways — buying its shares, winning it through a bidding process, or bringing it in through a merger or scheme of arrangement.

But a few doors stay shut. You generally can’t invest in a foreign business that deals in real estate as a trade, or in gambling. There are also careful rules around round-tripping — where money leaves India, goes into a foreign company, and then comes back into India as investment. This is allowed only within limits, and the structure can’t become a long chain of layered subsidiaries designed to hide the trail.

The paperwork you’ll deal with

Before your first payment leaves the country, you file Form FC (Financial Commitment) and get a unique number for the foreign entity from the RBI. Every year after that, you file an Annual Performance Report to show how the overseas business is doing. A chartered accountant usually certifies these filings.

None of this is dramatic, but it’s strict. Miss a filing and it’s treated as if you never filed at all — so good record-keeping matters from day one.

A realistic step-by-step

Here’s how a clean acquisition typically unfolds:

1. Find and check the target. Do proper due diligence — finances, legal history, tax position, and any hidden liabilities.
2. Check your headroom. Confirm the deal fits within the 400% net worth limit and the automatic route.
3. Agree the deal. Sign the share purchase or investment agreement.
4. Sort the tax and structure. Decide whether you hold the foreign business directly or through a holding company, keeping both Indian and foreign tax in mind.
5. File and remit. Work with your bank, file Form FC, and send the funds.
6. Stay compliant. File your annual reports and keep the RBI trail clean.

The part people underestimate

The regulatory filing is only half the story. The harder work is often after the deal closes — merging two teams, two cultures, and two ways of working. Many overseas acquisitions look great on paper and struggle in practice because nobody planned the first hundred days.

So while your advisors handle FEMA and the forms, spend equal energy on the people and the plan. That’s usually what decides whether the acquisition pays off.

The bottom line

Acquiring a foreign business is well within reach for Indian companies today. The framework is clearer than it used to be, the automatic route handles most deals, and the limits are workable for genuine businesses. Get the diligence right, respect the filing rules, and plan the integration — and an overseas acquisition can become one of the smartest moves your company ever makes.

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This article is for general information and isn’t legal or financial advice. Overseas acquisition rules change and every deal is different, so speak to a qualified advisor before you act.