Deepa Jewellers allows 100% FDI, subject to ownership test

Deepa Jewellers Limited can receive up to 100% foreign direct investment, or FDI, through India’s automatic route. The principal disclosed exception is the beneficial-owner rule in Press Note No. 2 (2026 Series), dated March 15, 2026: prior government approval is required when specified border-country interests exceed 10% or exercise control.

Can Deepa Jewellers receive 100% automatic-route FDI?

Yes. Deepa Jewellers states that FDI of up to 100% is permitted in the company under the automatic route pursuant to the FDI Policy and the Foreign Exchange Management Act, or FEMA, Non-debt Instruments Rules. Under the automatic route, a qualifying foreign investment does not require prior government approval merely because the investor is non-resident.

The 100% permission remains subject to the sectoral limit and the conditions, procedures and restrictions under the FDI Policy and FEMA. The Department for Promotion of Industry and Internal Trade, or DPIIT, issued its consolidated FDI Policy through a circular dated October 15, 2020, which superseded earlier press notes, press releases and clarifications in force on that date. The prospectus says the government proposes to update the consolidated circular annually, while DPIIT may issue updated policy circulars from time to time.

India’s Industrial Policy, 1991 sets the limits and conditions for foreign investment in Indian economic sectors, while FEMA regulates the manner in which investments are made. The prospectus identifies the relevant government ministries or departments and the Reserve Bank of India, or RBI, as the bodies responsible for granting foreign-investment approvals under the FDI Policy and FEMA.

When does Deepa Jewellers' ownership test require approval?

Prior government approval is required if citizens or entities of a country sharing a land border with India have rights or entitlements exceeding 10% of an investor entity’s shares, capital or profits, or exercise control over that investor entity. The stated test concerns an investor entity incorporated or registered outside a country sharing a land border with India, and applies directly or indirectly, individually or cumulatively, independently or collectively, whether persons act together or otherwise.

Press Note No. 2 (2026 Series), issued by DPIIT on March 15, 2026, amended the consolidated FDI Policy to define “beneficial owner” and establish this more-than-10% threshold. The amendment also requires approval where relevant persons exercise ultimate effective control over Deepa Jewellers in any manner. The place where an investor is incorporated therefore does not alone determine whether the government route applies under the disclosed policy.

The stated threshold is more than 10%, rather than 10% or more. An interest of exactly 10% of the investor entity’s shares, capital or profits is not described as exceeding the threshold, but control over the investor entity or ultimate effective control over Deepa Jewellers can separately require approval. Continued access to the automatic route depends on both the relevant ownership rights and the control arrangements.

Can a later Deepa Jewellers ownership transfer require approval?

Yes. A direct or indirect transfer of existing or future FDI in Deepa Jewellers requires government approval if the transfer results in beneficial ownership falling within the border-country restriction. The compliance assessment therefore applies not only when the initial investment is made, but also when a later change in the ownership chain changes the beneficial-owner position.

The prospectus links this continuing transfer requirement to the amended FDI Policy and FEMA framework. Press Note No. 3 (2020 Series), dated April 17, 2020, had provided that an entity or citizen of a country sharing a land border with India, or an investment beneficially owned by a citizen of such a country, could invest only through the government route. The March 15, 2026 amendment added the disclosed definition of beneficial owner and the quantitative threshold.

The Ministry of Finance made a similar amendment to the FEMA Rules on April 22, 2020. Separately, a Ministry of Corporate Affairs notification dated May 4, 2022 inserted a declaration in the share-transfer form stating whether government approval under the FEMA Non-debt Instruments Rules must be obtained before a share transfer. These mechanisms make the approval question relevant at the transfer stage as well as at the time of a bid.

The restrictions also apply to subscribers of offshore derivative instruments, according to the prospectus. The supplied text does not define offshore derivative instruments, but it expressly extends the restrictions beyond direct equity-share purchases. A bidder that requires prior approval must notify Deepa Jewellers and the registrar to the offer in writing during the bid or offer period and provide a copy of that approval.

What other foreign-investor conditions apply to Deepa Jewellers shares?

A share transfer between an Indian resident and a non-resident does not require RBI prior approval when three conditions are met. Deepa Jewellers’ activities must be under the automatic route and the transfer must not attract the SEBI Takeover Regulations; non-resident ownership must remain within the FDI sectoral limit; and pricing must follow guidelines prescribed by SEBI and RBI.

Those three conditions show that a 100% FDI ceiling does not settle every transfer requirement. A transaction may still require assessment under the takeover rules, applicable pricing guidelines and the beneficial-owner restriction. The prospectus describes the automatic route as available only where the policy conditions and prescribed procedures are satisfied.

Qualified corporate bodies, or QCBs, cannot participate in the offer under the existing government policy cited in the prospectus. The document directs readers to separate offer-procedure sections for aggregate investment limits applicable to eligible non-resident Indians and foreign portfolio investors, or FPIs, but does not state those numerical limits in this foreign-ownership section. They cannot be derived from the stated 100% FDI permission.

The offered equity shares have not been and will not be registered under the U.S. Securities Act. They are offered and sold outside the United States in offshore transactions as defined in, and in reliance on, Regulation S and applicable laws in the jurisdictions where sales occur. The shares also have not been registered, listed or otherwise qualified in other jurisdictions outside India, unless an offer, sale or bid complies with that jurisdiction’s laws.

Conclusion

Deepa Jewellers’ disclosed 100% automatic-route FDI capacity is the general position, while the March 15, 2026 beneficial-owner test creates a specific approval requirement. The key distinction is that a foreign investor’s country of incorporation is not the only consideration when a border-country citizen or entity has more than 10% of shares, capital or profits in that investor, or has the specified control rights.

What to watch next is a direct or indirect transfer, or a control change, that causes beneficial ownership to fall within the disclosed restriction because approval is then required for existing or future FDI. The prospectus directs bidders to make independent investigations, ensure their bids remain within applicable legal limits, and submit written evidence of any required approval to Deepa Jewellers and the registrar during the bid or offer period.