NRI & HNI Investment Guide: Opportunities in Indian Markets

India's economic growth story has captured global attention, with GDP growth consistently outpacing major economies. For Non-Resident Indians (NRIs) and High Net Worth Individuals (HNIs), this presents a compelling opportunity to participate in one of the world's fastest-growing markets. This guide covers everything you need to know about investing in Indian businesses.

Why India, Why Now?

India's economic trajectory is backed by strong fundamentals:

• Demographic dividend: With a median age of 28 years and 65% of the population under 35, India has the world's largest working-age population, according to World Bank data.
• Consumption growth: Private consumption accounts for approximately 60% of India's GDP, with the middle class expected to reach 580 million by 2025.
• Digital transformation: India has the world's third-largest startup ecosystem, and digital adoption across businesses is accelerating post-pandemic.
• Government initiatives: Programs like Make in India, Startup India, and PLI schemes are creating favorable conditions for business growth.

Regulatory Framework for NRI Investments

India's regulatory environment for foreign investments has become increasingly streamlined. Here's what NRI investors need to know:

Investment Routes

Banking Requirements

NRIs can invest through:

• NRE Account: Foreign currency deposited, fully repatriable
• NRO Account: Indian income deposited, limited repatriation (up to USD 1 million per financial year)
• FCNR Account: Foreign currency maintained, fully repatriable

For equity investments in unlisted companies, funds can be invested through any of these accounts, and returns (including capital gains) are repatriable subject to applicable taxes.

Tax Considerations

Key tax implications for NRI investors:

• Capital gains: Long-term capital gains (holding period > 24 months for unlisted shares) are taxed at 20% with indexation benefits. Short-term gains are taxed at applicable slab rates.
• Dividend income: Taxable in the hands of investors at applicable rates. TDS is deducted at source.
• DTAA benefits: India has Double Taxation Avoidance Agreements with many countries, which can reduce tax burden.

Note: Tax laws change frequently. Always consult a qualified tax advisor for your specific situation.

Types of Investment Opportunities

1. Private Equity in Unlisted Companies

This involves taking equity stakes in established businesses or high-potential ventures. Key characteristics:

• Typical investment size: ₹50 lakhs to ₹5 crores
• Expected holding period: 3-5 years
• Returns: 18-25% IRR for well-selected opportunities
• Risk: Moderate (established businesses with track record)

2. Structured Debt Instruments

Non-convertible debentures (NCDs) or other structured instruments offering:

• Fixed returns (typically 12-18% annually)
• Secured against business assets
• Shorter duration (1-3 years)
• Lower risk profile than equity

3. Convertible Instruments (CCPS)

Compulsorily Convertible Preference Shares offer:

• Downside protection through liquidation preference
• Upside participation through equity conversion
• Popular structure for growth-stage investments

Due Diligence Essentials

The biggest challenge for NRI investors is conducting thorough due diligence from abroad. Key areas to evaluate:

Common Challenges and How to Address Them

Challenge 1: Distance and Monitoring

Solution: Work with investment platforms that provide ongoing monitoring, regular reporting, and on-ground presence. Quarterly updates with financial reports and operational KPIs are essential.

Challenge 2: Finding Quality Opportunities

Solution: Rather than relying on personal networks (which may surface suboptimal deals), work with curated deal flow providers who have systematic processes for identifying and vetting businesses.

Challenge 3: Valuation Assessment

Solution: Use multiple valuation methodologies (DCF, comparable transactions, asset-based) and engage professionals familiar with Indian market norms.

Challenge 4: Exit Uncertainty

Solution: Structure investments with clear exit mechanisms—buyback provisions, drag-along rights, or milestone-based strategic sale provisions.

The Hathwell Approach

At Hathwell, we've designed our entire platform to address the specific challenges NRI and HNI investors face when investing in Indian businesses:

• Curated deal flow: We identify and vet businesses using our PRIME framework, presenting only opportunities that meet institutional-grade standards.
• End-to-end due diligence: Our team conducts comprehensive financial, legal, and operational due diligence, providing investors with detailed reports.
• On-ground presence: Based in Bangalore with a pan-India network, we provide the local presence that remote investors lack.
• Ongoing monitoring: Post-investment, we provide quarterly reporting, attend board meetings, and maintain active engagement with portfolio companies.
• Exit facilitation: We actively work on exit opportunities, whether through strategic sales, secondary transactions, or IPO preparation.