Foreign direct investment (FDI) into India continues to be supported by a liberalised investment framework that allows overseas investors to enter the Indian market through different routes and investment structures. While the automatic route remains the principal channel for FDI across eligible sectors, investment through the acquisition of existing shares provides foreign investors with another important way to establish or expand their presence in India.
According to the data from the Department for Promotion of Industry and Internal Trade (DPIIT), published on 26 October 2026, FDI through the acquisition of shares increased by 3.34 per cent in 2025 compared with 2024. This indicates continued foreign investor interest in investing in established businesses within the country.
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Get expert support on FDI eligibility, investment structuring, FEMA requirements, regulatory approvals, and RBI filings.India FDI routes: Automatic route, government route, and share acquisition
The FDI framework in India broadly distinguishes between investments permitted under the automatic route and those requiring approval under the government route. Applicable routes depend on factors such as the sector, foreign ownership level, sectoral cap and other conditions prescribed under India’s foreign investment policy and foreign exchange regulations.
1. Automatic route: A foreign investor can invest in an eligible Indian business without obtaining prior approval from the central government, provided the investment satisfies the applicable sectoral cap, entry conditions, pricing requirements and other regulatory conditions.
2. Government route: This requires prior approval before the investment is made. This route applies to sectors and transactions for which government approval is specifically prescribed, as well as certain investments subject to restrictions under India’s FDI policy.
3. Acquisition of existing shares: This should be viewed as an investment structure rather than a separate approval route. A foreign investor may acquire shares in an existing Indian company under either the automatic or government route. This depends on the sector and applicable FDI conditions.
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FDI trends by investment route in India
The available data shows that the automatic route remains the dominant channel for FDI into India. Investment through the acquisition of existing shares has remained a key component of foreign investment activity. Such inflows increased from US$12.53 billion in 2021 to US$13.26 billion in 2025, despite fluctuations during the intervening years.
|
Year |
Government route (US$ million) |
Automatic route (US$ million) |
Inflow through acquisition of existing shares (US$ million) |
|
2021 |
2,202 |
36,605 |
12,532 |
|
2022 |
776 |
41,934 |
9,635 |
|
2023 |
366 |
28,515 |
12,443 |
|
2024 |
2,107 |
38,126 |
12,826 |
|
2025 |
2,041 |
41,924 |
13,255 |
|
2026 (up to June) |
380 |
26,054 |
4,356 |
Source: FDI newsletter; Department for Promotion of Industry and Internal Trade, GoI.
The data indicates that foreign investors continue to use acquisitions of existing shares alongside the automatic route to access the Indian market. In 2025, investment through acquisition of existing shares reached its highest level in the period shown, at US$13.26 billion.
How foreign investors acquire existing shares in India
A foreign investor can acquire existing shares of an Indian company from an existing shareholder rather than subscribing to newly issued shares.
For example, a foreign company may purchase a 30 per cent stake in an Indian company from an existing shareholder. The transaction gives the foreign investor an ownership interest in an established Indian business, while the shares are transferred from the existing holder to the foreign investor.
An acquisition of existing shares can serve different investment objectives. A foreign investor may acquire a minority stake to establish a strategic presence, purchase a substantial stake to participate in the company’s management, or acquire a controlling interest as part of a cross-border acquisition or mergers and acquisition (M&A) strategy.
Importantly, not every acquisition of shares constitutes an M&A transaction. Share acquisitions can range from minority investments to full takeovers, depending on the percentage of shares acquired and the rights and control obtained by the investor.
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Foreign investments in India through acquisition of existing shares remained active during the first six months of 2026, although monthly inflows varied. The highest monthly inflow was recorded in January at US$759 million, followed by May at US$755 million.
June recorded US$716 million, while April recorded US$688 million. Inflows were lower in February and March, at US$503 million and US$405 million, respectively.
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Our specialists support investment structuring, entity setup, regulatory approvals, taxation, accounting, and compliance.Compliance requirements for acquisition of existing shares
Foreign investors acquiring shares in Indian companies must comply with applicable foreign exchange, pricing, securities and reporting requirements.
For transactions involving listed companies, the investor must comply with applicable securities market regulations, including requirements administered by the Securities and Exchange Board of India (SEBI). Transactions involving unlisted companies are subject to the applicable valuation and pricing requirements under India’s foreign exchange regulations.
The transfer of existing shares between a resident and a non-resident is also subject to prescribed reporting requirements. These transactions are generally reported to the Reserve Bank of India (RBI) through the investor’s authorised dealer bank using Form Foreign Currency- Transfer of Shares (FC-TRS) within the applicable prescribed timeframe.
Accordingly, investors considering an acquisition of shares should assess the following before completing the transaction:
- Target company’s sector
- Foreign ownership limits
- Entry route
- Pricing requirements
- Valuation, reporting obligations
- Additional sector-specific conditions
Why foreign investors choose share acquisitions for India market entry
Instead of building a business from the ground up, an investor can obtain an ownership interest in an existing company with established operations, assets, customers, employees and market presence.
Depending on the transaction structure, a share acquisition can therefore provide:
- Faster market entry: Investors can obtain an interest in an operating Indian business rather than establish a new operation.
- Access to established businesses: Investors can acquire stakes in companies with existing customers, infrastructure, workforce and distribution networks.
- Strategic participation: A significant shareholding may provide the investor with greater influence over the company’s business and strategic decisions, subject to the rights attached to the investment.
- M&A opportunities: Acquisition of a substantial or controlling stake can form part of a broader cross-border M&A or takeover strategy.
- Flexibility in investment size: Foreign investors can acquire minority, substantial or controlling interests depending on their commercial objectives and applicable FDI limits.
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Outlook for India FDI through share acquisitions
The continued flow of foreign investment through acquisition of existing shares reflects the importance of established Indian companies as potential investment targets for overseas investors. Rise in acquisition-based FDI in 2025, together with US$3.83 billion of inflows during the first half of 2026, indicates that this investment structure continues to play an important role in India’s FDI landscape.
For foreign investors, however, the attractiveness of a share acquisition depends not only on the commercial value of the target company but also on India’s sectoral caps, entry route, pricing and valuation rules, ownership restrictions, foreign exchange regulations and transaction-specific approvals.
As a result, investors evaluating an acquisition of an Indian company should determine the applicable FDI route and regulatory requirements before structuring and executing the transaction.
Who can receive FDI in India through acquisition of shares?
Eligible Indian companies and other permitted Indian entities can receive FDI through the acquisition or transfer of existing equity shares. This is subject to applicable sectoral caps, entry routes, ownership restrictions, pricing rules, and FEMA requirements.
Foreign investors may acquire minority, strategic, or controlling stakes in listed or unlisted Indian companies. Such transactions may also form part of a broader M&A transaction.
Who can invest in India through acquisition of shares?
A person resident outside India who is eligible to invest under India’s FDI policy can acquire shares of an Indian company. Eligible investors may include foreign companies and other overseas entities, eligible funds and investment vehicles, non-resident Indians (NRIs), and overseas citizens of India (OCI), subject to applicable rules.
Can Indian limited liability partnerships (LLPs) receive FDI?
Yes. Eligible foreign investors can invest in an Indian LLP through capital contribution or by acquiring or transferring profit shares. However, the LLP must operate in a sector where 100 per cent FDI is permitted under the automatic route and there are no FDI-linked performance conditions.
