Foreign MNC Stocks in India

Investing in the stock market is one of the modern requirement essential for financial freedom. But while investing adhering to the basics of investment is paramount and investing without any basic knowledge.

With the advancement in technology, the world has become one big market and you can not only buy products from foreign countries but also can invest in stocks of foreign companies as well. 

It can happen that one market has become stagnant of there is too much volatility in one market and you want to invest in market of other booming countries or in stocks of MNCs big markets which are too big to miss, then you can always invest in the foreign stocks of international which will diversify your portfolios.

 

What is a Multinational Corporation (MNC)?

A Multinational Corporation, or MNC, is a company that provides services and facilities in multiple countries beyond its country of origin. These corporations establish factories and offices across various nations and are managed on a global scale, typically from a central office located in their home country. It's important to note that a company is classified as an MNC when it exports goods to other countries for sale.

The primary motivation behind a company becoming an MNC is to broaden its customer base and extend its operations into multiple countries, ultimately aiming to increase profitability. MNCs often adapt or expand their products and services in the countries where they operate to align with the preferences and cultural norms of local customers. Additionally, these corporations must adhere to the regulations, rules, and tax structures of the countries in which they conduct their business.

 

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How can you Invest in Foreign Stocks?

Overseas investment by Indian residents can take two primary forms: Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI). This article focuses on OPI and provides an in-depth guide on its merits, demerits, exchange control regulations, and tax reporting requirements.

 

1). Liberalized Remittance Scheme (LRS) as the Foundation

Under the Liberalized Remittance Scheme (LRS), Indian residents can allocate up to $250,000 per financial year (April to March) cumulatively for permissible investments, including both ODI and OPI routes. The new framework has clearly defined "Overseas Portfolio Investment" within the LRS limit.

 

2). Investment in Shares of Listed Foreign Entities

Resident Indians can venture into overseas stock markets by investing in shares of foreign companies listed on international exchanges. The key is to maintain less than a 10% stake and avoid controlling the foreign entity. This opens up avenues like investing in renowned companies such as Amazon, Apple, Microsoft, and Tesla.

 

3). Exploring International Mutual Funds

For those averse to direct stock investments, international Mutual Funds provide an excellent alternative. These funds offer exposure to global markets and invest in foreign stocks. The beauty lies in the fact that such investments fall within the LRS limit without the burden of additional reporting.

 

4). Delving into Listed Debt Instruments

Indian residents seeking a steady income stream from international markets can consider listed bonds of foreign governments or corporate bonds of foreign entities. Similar to equities, these investments fall under the LRS limit, and there is no reporting requirement under the new framework.

 

5). Special Cases: Inheritance and Gift

The framework acknowledges special cases where Indian residents acquire foreign securities through inheritance or as gifts. In both instances, there is no impact on the LRS limit, and reporting is not required, offering flexibility and ease for those dealing with inherited or gifted foreign securities.

 

6). Investments in International Financial Services Centre (IFSC)

The GIFT City in Gujarat, known as the International Financial Services Centre (IFSC), opens up unique opportunities for Indian residents. Investments in entities within IFSC, including equity capital and investment in units of funds, are covered under the LRS limit without the need for additional reporting.

 

7). Navigating Sweat Equity Shares

Foreign entities often issue sweat equity shares to employees, providing an avenue for Indian residents to acquire them. The framework allows residents to acquire such shares up to 10% of the equity capital, with remittances falling under the LRS limit.

 

8). Employee Stock Ownership Plans (ESOPs

Indian residents employed by overseas entities may benefit from ESOPs and Employee Benefits Schemes. While the acquisition of shares or interest under these plans is capped at 10% of the paid-up capital, reporting is required in Form OPI within 60 days.

 

 

Top 5 Best Foreign MNC Stocks listed in India

Company Name	Market Cap (in Cr)	Share Price (in Rs.)	Debt/Equity Ratio	ROCE (%)
P&G Health Limited	8,671	5,223	0.02	45.5
Abbott India Limited	53,560	25,205	0.03	41.1
Nestle India Limited	2,39,106	2,480	0.1	138
Colgate-Palmolive (India) Limited	68,981	2,536	0.04	79.1
GlaxoSmithKline Pharmaceuticals	38,452	2,270	0.01	36.4

 

1)    P&G Health Limited

Procter & Gamble Hygiene and Health Care Limited manufactures and markets branded and packaged consumer goods in the feminine care and healthcare sectors. The company operates in two distinct business segments: Healthcare Products and Hygiene Products. 
Within the Healthcare Products segment, the offerings include creams, ointments, cough drops, and tablets. Meanwhile, the Hygiene Products segment encompasses items related to women's hygiene and other skincare products.

 

 

2)    Abbott India Limited

Abbott India Limited is an Indian company engaged in the production and sale of pharmaceuticals. The company's portfolio includes diagnostics, medical devices, nutrition products, and branded generic medicines. 
Abbott India Limited provides a wide range of products and services across various therapeutic areas, including women's health, gastroenterology, central nervous system, metabolic, multi-specialty, vaccines, and consumer health.

 

 

3)    Nestle India Limited

Nestle India Limited, headquartered in India, primarily operates in the food industry, focusing on the production and sale of various products. The company's diverse range includes food items, milk products, nutrition offerings, prepared dishes, cooking aids, powdered and liquid beverages, as well as confectionery. 
Within its milk products and nutrition category, Nestle India Limited offers an array of items such as dairy whitener, condensed milk, ultra-high heat-treated milk, yogurt, formulas for both mothers and infants, baby food, and health-focused nutrition.

Nestle is considered to be one of the best FMCG stocks in India.

 

 

4)    Colgate-Palmolive (India) Limited

Colgate-Palmolive (India) Limited is involved in the production and marketing of personal care products, including toothpaste, toothpowder, toothbrushes, mouthwash, and various other items. The company offers a diverse range of personal care products, encompassing items such as soaps, cosmetics, and toiletries. Additionally, Colgate-Palmolive (India) Limited sells various oral care products, including toothpaste, toothbrushes, mouthwash, and rinses, among other items.

 

 

5)    GlaxoSmithKline Pharmaceuticals

GlaxoSmithKline Pharmaceuticals Ltd is an Indian pharmaceutical and healthcare company grounded in research and is a subsidiary of GSK. The company's product portfolio consists of prescription medicines and vaccines. 
The prescription medicines span various therapeutic areas, including anti-infectives, dermatology, gynaecology, diabetes, oncology, cardiovascular diseases, and respiratory diseases. Additionally, the company provides a variety of vaccines designed for preventing conditions such as hepatitis A, hepatitis B, invasive diseases caused by H. influenzae, chickenpox, diphtheria, pertussis, tetanus, rotavirus, cervical cancer, and more.

 

 

Conclusion

Overseas investment by Indian residents has become more streamlined and accessible with the new framework. Whether through direct investments in foreign stocks, mutual funds, or special cases like inheritance and gifts, the options are diverse. The IFSC in GIFT City further enhances the scope, providing a platform for investing abroad. 

Understanding the nuances of sweat equity shares, ESOPs, and minimum qualification shares adds layers to the possibilities. As Indian residents explore these avenues, it's crucial to stay within the LRS limits and adhere to reporting requirements when applicable.