Pharma FDI (Greenfield/Brownfield)

By Sneha Iyer | Updated March 2026

What Is Pharma FDI (Greenfield/Brownfield)?

India's pharmaceutical FDI policy distinguishes between two types of investment: greenfield (establishing a new manufacturing facility from scratch) and brownfield (acquiring or investing in an existing Indian pharmaceutical company). Under the Consolidated FDI Policy, 2020, greenfield pharma projects are eligible for 100% FDI under the automatic route, while brownfield projects allow up to 74% FDI under the automatic route and beyond 74% up to 100% under the government approval route.

This distinction matters enormously for foreign pharmaceutical companies. India is the "pharmacy of the world" — supplying over 60% of global vaccine production and 20% of global generic medicine exports. The Drugs & Pharmaceuticals sector received cumulative FDI inflow of approximately USD 24.62 billion from April 2000 to June 2025. However, the brownfield/greenfield distinction creates fundamentally different regulatory pathways. A greenfield investment (building a new plant) faces zero FDI approval requirements. A brownfield investment (acquiring an Indian pharma company like Ranbaxy or Piramal Healthcare) triggers government scrutiny when foreign ownership exceeds 74%.

The policy emerged from genuine public health concerns: a wave of foreign acquisitions of Indian pharma companies between 2008 and 2014 raised fears about drug pricing, essential medicine availability, and the erosion of India's generic drug manufacturing capability.

Legal Basis

• Consolidated FDI Policy, 2020 (F.No. 5(2)/2020-FC-1) — Effective October 15, 2020. Section 5.2.23 governs pharma FDI. Greenfield: 100% automatic. Brownfield: 74% automatic, beyond 74% government approval.
• Press Note 3 of 2011 (DIPP) — First introduced the greenfield/brownfield distinction. Prior to this, 100% FDI under automatic route applied to all pharma investments without differentiation.
• Press Note 1 of 2014 (DIPP) — Restricted non-compete clauses in inter-se agreements to "special circumstances with government approval only."
• Press Note 5 of 2016 (DPIIT) — Major liberalisation: raised brownfield automatic route from 0% to 74%. Previously, all brownfield pharma FDI required government approval regardless of percentage.
• Press Note 3 of 2020 (DPIIT) — Entities from countries sharing a land border with India (including China) require government approval for any FDI in pharma — even greenfield — overriding the automatic route. This was prompted by concerns about opportunistic acquisitions during the COVID-19 pandemic.
• FEMA (Non-Debt Instruments) Rules, 2019 — Schedule I, read with Annex. RBI regulatory framework implementing pharma FDI conditions.

Greenfield vs. Brownfield: The Core Distinction

The entire pharma FDI framework hinges on whether an investment is classified as greenfield or brownfield. The classification is based on the nature of the project, not the age of the company:

FDI Routes and Limits: A Detailed Breakdown

Understanding the specific limits, routes, and conditions is critical for structuring pharma investments correctly:

Government Approval Conditions for Brownfield FDI Above 74%

When a foreign investor seeks more than 74% ownership in an existing Indian pharma company, the government approval process imposes specific conditions. These were originally formulated by the Foreign Investment Promotion Board (FIPB, now abolished) and are currently evaluated by the competent authority under the DPIIT:

• Essential medicine production: The investee company must maintain production levels of essential medicines (as listed in the National List of Essential Medicines) and their supply to the domestic market at least at the level prevailing at the time of FDI induction
• R&D expenditure: The investee company must maintain R&D spending in absolute value terms for a period of 5 years from the date of FDI induction. This prevents cost-cutting in R&D post-acquisition
• Technology transfer disclosure: Complete information relating to transfer of any technology must be furnished to the government at the time of seeking approval
• Non-compete clause restriction: Per Press Note 1 of 2014, non-compete clauses between the foreign acquirer and Indian promoter are permitted only in "special circumstances with government approval." The Indian promoter must remain free to continue in the same line of business

Policy Evolution: From Open Door to Safeguards

Production-Linked Incentive (PLI) Scheme for Pharma

The Production-Linked Incentive (PLI) Scheme for pharmaceuticals, announced in March 2020 and expanded subsequently, has become a major driver of greenfield pharma FDI. Key details:

• PLI for bulk drugs (APIs/KSMs): Outlay of INR 6,940 crore over 8 years to promote domestic manufacturing of 53 critical bulk drugs where India depends on imports (primarily from China)
• PLI for pharma products: Outlay of INR 15,000 crore over 9 years for high-value pharmaceuticals including biopharmaceuticals, complex generics, patented/off-patent drugs, and orphan drugs
• Investment generated: INR 40,294 crore invested under the scheme till September 2025, exceeding the target of INR 17,275 crore by over 130%
• Sales generated: Total sales of INR 3,08,408 crore including INR 1,98,509 crore in exports since inception
• Budget 2025-26: Department of Pharmaceuticals allocated INR 5,268 crore (USD 602 million), up 28.8% over previous estimates

For foreign pharma investors, PLI creates a strong incentive to choose the greenfield route — not only does it avoid the brownfield approval requirement, it also qualifies for government incentives of 3-10% of incremental sales.

CDSCO Regulatory Considerations

Foreign pharma investors must navigate India's drug regulatory framework administered by the Central Drugs Standard Control Organisation (CDSCO) under the Ministry of Health & Family Welfare, regardless of the FDI route:

• Manufacturing license: Any new manufacturing facility (greenfield) requires a state-level drug manufacturing license under the Drugs and Cosmetics Act, 1940, and Rules, 1945
• Import registration: Foreign manufacturers importing drugs into India need an import license (Form 10) from CDSCO, which typically takes 6-9 months
• Authorised Indian agent: Foreign manufacturers must appoint an India-based authorised agent for all regulatory submissions
• GMP compliance: Manufacturing facilities must meet WHO-GMP or Schedule M standards, verified through CDSCO inspections

How This Affects Foreign Investors in India

The greenfield/brownfield distinction creates two fundamentally different investment experiences:

Greenfield path (simpler): A foreign pharma company setting up a new manufacturing plant in India faces no FDI approval requirements. It files FC-GPR with the authorised dealer bank within 30 days, obtains state-level manufacturing licenses, and potentially qualifies for PLI incentives. Total FDI structuring timeline: 3-6 months.

The key advantage is in SEZ/pharma zone locations: several states (Gujarat, Telangana, Himachal Pradesh, Andhra Pradesh) offer dedicated pharma SEZs with additional tax benefits under SEZ policy.

Brownfield path (complex): Acquiring an existing Indian pharma company beyond 74% triggers the government approval route. The foreign investor must demonstrate that essential medicine production and R&D will be maintained, disclose all technology transfer plans, and accept non-compete restrictions. The approval process can take 6-12 months and may include conditions imposed by the government. Additionally, FDI pricing guidelines apply — the share acquisition price must meet the minimum valuation per FEMA rules.

Common Mistakes

• Structuring a brownfield acquisition as "greenfield" to avoid the 74% approval threshold. Some investors set up a new Indian entity (greenfield) and then transfer assets from an existing Indian company into it, claiming the automatic route. Regulators look at substance over form — if the transaction effectively acquires an existing pharmaceutical business, it will be treated as brownfield regardless of the entity structure.
• Ignoring Press Note 3 (2020) restrictions for Chinese investors. Chinese pharmaceutical companies (or companies with significant Chinese beneficial ownership) cannot use the automatic route even for greenfield pharma investments. This restriction was introduced during COVID-19 when concerns arose about opportunistic acquisitions of stressed Indian pharma assets.
• Failing to maintain R&D and essential medicine production post-acquisition. Government approval for brownfield FDI above 74% comes with binding conditions. If the acquirer reduces R&D spend or essential medicine production below pre-acquisition levels, enforcement action under FEMA can follow. This is not a theoretical risk — the Parliamentary Standing Committee on Commerce actively monitors compliance.
• Not accounting for non-compete clause restrictions when negotiating acquisition terms. Foreign acquirers often include standard non-compete provisions in share purchase agreements. Under Press Note 1 (2014), non-competes require special government approval and are only granted in exceptional circumstances. Indian promoters retain the right to start or continue competing pharmaceutical businesses.
• Overlooking the medical devices carve-out. Since Press Note 12 of 2015, medical devices are carved out from pharma FDI restrictions entirely. Both greenfield and brownfield medical device investments allow 100% FDI under the automatic route. Investors who structure medical device acquisitions under the pharma framework unnecessarily subject themselves to the 74% brownfield cap.

Practical Example

PharmaNova GmbH, a German pharmaceutical company specialising in oncology drugs, evaluates two India investment options:

Option A — Greenfield (New Facility): PharmaNova invests EUR 30 million (approximately INR 275 crore) to build a new formulation plant in Hyderabad Pharma City. Under the automatic route, no government FDI approval is needed. PharmaNova incorporates a wholly owned subsidiary (PharmaNova India Pvt Ltd) with 100% FDI. FC-GPR is filed within 30 days. The company applies for PLI benefits — qualifying for 3% incentive on incremental sales. State manufacturing license is obtained in 4 months. Plant commissioning takes 18 months. Total timeline: approximately 24 months to first production. No conditions on essential medicine levels or R&D spend.

Option B — Brownfield (Acquisition): PharmaNova seeks to acquire 80% of BioGenix Pvt Ltd, an established Indian generic manufacturer with INR 500 crore annual revenue and 200 product registrations. Since 80% exceeds the 74% automatic route threshold, PharmaNova must apply for government approval. The application requires disclosure of plans for essential medicine production (BioGenix manufactures 15 NLEM-listed drugs), R&D maintenance commitments (BioGenix spends INR 25 crore annually on R&D), and technology transfer details. The acquisition price per share must meet FEMA minimum valuation (based on DCF or NAV per Rule 21 of NDI Rules). Government approval takes 8 months with a condition: maintain production of all 15 NLEM drugs at current levels for 5 years. The non-compete clause with BioGenix's Indian promoter is rejected by the government — the promoter retains the right to launch a competing generic pharma business.

PharmaNova chooses Option A for its oncology line (greenfield, faster, PLI-eligible) and separately pursues Option B for the BioGenix acquisition (brownfield, slower, but gives immediate market access with 200 product registrations). Total combined investment: INR 700 crore.

Key Takeaways

• Greenfield pharma FDI allows 100% under the automatic route — no government approval needed, making it the fastest path for foreign pharma companies entering India
• Brownfield pharma FDI allows 74% under the automatic route; above 74% requires government approval with conditions on essential medicine production, R&D maintenance, and technology transfer
• The greenfield/brownfield distinction was introduced by Press Note 3 of 2011, triggered by high-profile acquisitions like Daiichi-Ranbaxy (USD 4.6 billion) and Abbott-Piramal (USD 3.7 billion)
• Press Note 3 of 2020 requires government approval for all pharma FDI from land-border countries (including China), even for greenfield investments
• Medical devices are carved out: 100% automatic route for both greenfield and brownfield since 2015
• The PLI Scheme (total outlay INR 21,940 crore) strongly incentivises greenfield investments, having attracted INR 40,294 crore in investment through September 2025

Structuring a pharmaceutical investment in India — whether greenfield plant setup or brownfield acquisition? Beacon Filing provides FDI advisory for pharma sector entry, including FEMA structuring, government approval filings, and regulatory coordination with CDSCO.