Some investors who incorporate a company in India seek finance through the Bombay Stock Exchange (BSE), the world’s 10th largest stock exchange by market capitalization (US$1.6 trillion), and the world’s 5th busiest stock exchange with average daily trading volume of 330 million shares.

Foreign entrepreneurs who incorporate a company in India should note that listing on the BSE takes nine months on average, from initial listing application to acceptance on the BSE. A company is eligible to list on the BSE if it meets one of the following criteria i) it has a market capitalisation of at least US$1.25 million ii) turnover is at least US$750,000 for the 3 preceding years and iii) the company has at least 1,000 shareholders.

Private equity investments in India amounted to US$7.9 billion in 2006, up from just US$3.8billion in 2005, the majority in Indian technology and business process outsourcing sectors. The number and total value of private equity deals in India sprang from 5 in 1996 (worth US$20 million) to 299 (worth US$7.46 billion) in 2006. In 2007, private equity investments are on pace to cross the US$10 billion mark, and some project it to hit US$15.

Options for raising corporate finance in India are growing. For example, because the Indian Ministry of Finance prevents Indian companies borrowing more than US$20 million overseas, the domestic private equity sector is expanding. Almost 400 private equity firms are licensed to operate in India.

With the exception of Special Economic Zones (SEZs), the Indian government does not provide tax or other financial incentives to attract foreign investment. An  SEZ Enterprise is an attractive entity for foreign investors who incorporate a company in India because it can i) be 100% foreign owned ii) obtain 100% tax exemption on export income for the first 10 years of manufacturing and iii) because it benefits from a large pool of low cost local labour. Outside the SEZs, the majority of foreign investment relates to the business process outsourcing and IT and software development sectors, both of which are open to 100% foreign investment.