An Indian company entering its first overseas market usually has a simple structure: India owns one foreign subsidiary.

Then the business grows.

A US company is added. A European acquisition appears. Someone identifies an opportunity in Africa. The group wants a regional sales team, central treasury, acquisition capability and perhaps a trading operation. At that stage, the organisational chart begins to raise a much bigger question:

Should India continue owning every overseas company directly, or should the group create a regional hub in Singapore, the UAE or another international business centre?

That question is particularly timely following reports that Coal India is establishing its first overseas trading office in Singapore to support global mineral trading and potential acquisitions across markets including Africa, Chile, Canada and Australia. Coal India’s facts are specific to its own strategy, but the broader structuring question applies to many Indian groups moving from a single foreign operation to a genuine multinational footprint.

A regional hub can be extremely valuable. It can also become an expensive company that exists mainly because someone said, “Everyone uses Singapore.”

The difference is whether the hub solves a real business problem.

Direct ODI Is Often the Better Starting Point

Suppose an Indian manufacturing company wants to establish subsidiaries in the US and Germany.

The simplest structure may be:

India → US subsidiary

India → German subsidiary

Both investments can be made under India’s Overseas Investment framework, subject to the applicable eligibility, financial commitment, reporting and host-country requirements.

Under the current FEMA regime, an Indian entity’s aggregate financial commitment across foreign entities is generally capped at 400% of its net worth based on the last audited balance sheet. Financial commitment exceeding USD 1 billion in a financial year requires prior RBI approval even where it remains within the overall eligible limit.

The direct model has obvious advantages.

There is one less company to maintain, one less set of accounts, one less corporate tax return and one less layer through which dividends, funding and decisions must move.

If the group expects only one or two foreign operations, there may be no commercial reason to add a holding company in the middle.

A structure should become more sophisticated only when the business becomes more sophisticated.

When a Singapore Hub Starts Making Commercial Sense

Now change the facts.

The Indian group expects to acquire companies across Southeast Asia, Australia and Africa. It wants a regional management team in Singapore. The Singapore entity will negotiate acquisitions, manage regional procurement, employ senior executives, coordinate treasury, contract with suppliers and perhaps undertake genuine trading activity.

That is no longer merely a holding company.

It is becoming a regional operating platform.

This is where an intermediate entity can start providing real value.

Instead of India separately owning eight companies, Singapore can potentially own and manage regional subsidiaries, centralise governance and provide a platform from which acquisitions can be executed and integrated.

The structure might become:

India → Singapore Regional Hub → Multiple Overseas Subsidiaries

FEMA permits overseas structures involving step-down subsidiaries, subject to the Overseas Investment Rules and reporting framework. Details relating to acquisition, establishment, transfer or winding-up of step-down subsidiaries are captured through the annual reporting process.

The question therefore is not whether a multi-layer international structure is possible.

The question is what commercial purpose the additional layer serves.

Acquisition Flexibility Can Be a Genuine Advantage

A regional hub becomes particularly useful when acquisitions are expected to be recurring rather than exceptional.

Suppose an Indian technology business plans to acquire companies in Indonesia, Vietnam and Australia over the next five years.

If each acquisition is held directly from India, every investment sits separately under the Indian parent.

A regional holding company may allow acquisitions to sit under one regional platform, potentially making future reorganisations, regional financing, management oversight and partial divestments operationally easier.

The Indian company can also make financial commitment by way of permitted debt or guarantees where the FEMA conditions are satisfied. RBI requires the Indian entity to have made ODI and acquired control in the relevant foreign entity before extending specified debt or non-fund based financial commitment, and intercompany loans must carry an arm’s-length interest rate.

This flexibility becomes relevant when the international group needs more than equity capital.

But FEMA Layering Cannot Be Ignored

A Singapore hub does not create unlimited freedom to build corporate layers.

One particularly important restriction arises where the foreign entity itself invests back into India.

Rule 19(3) of the Overseas Investment Rules prohibits a person resident in India from making financial commitment in a foreign entity that invests into India, directly or indirectly, where the resulting structure has more than two layers of subsidiaries, subject to specified exemptions.

This becomes relevant in structures such as:

India → Singapore → Foreign subsidiaries → India

or where an overseas acquisition already owns an Indian company.

The structure may be commercially sensible, but the FEMA layering position needs to be mapped before the acquisition is signed.

This is precisely why international structuring should be reviewed as a complete ownership chart rather than one transaction at a time.

Tax Treaties Are a Benefit, Not a Business Model

Singapore has an extensive treaty network and is widely used for regional headquarters, investment and trading operations.

That does not mean placing a Singapore company between India and another country automatically produces treaty benefits.

Singapore determines corporate tax residence based broadly on where the company’s control and management is exercised. A company seeking treaty benefits generally needs to establish Singapore tax residence and obtain the relevant Certificate of Residence.

The India-Singapore treaty has also been modified through the Multilateral Instrument to include the Principal Purpose Test. Treaty benefits can be denied where obtaining the benefit was one of the principal purposes of an arrangement, unless granting the benefit would be consistent with the object and purpose of the treaty provision.

So if the Singapore company has no employees, no meaningful decision-making, no business activity and no reason to exist except accessing a treaty rate, the structure becomes considerably harder to defend.

The practical rule is simple:

Substance should follow function.

If Singapore is genuinely the regional headquarters, the people, authority, contracts and decision-making should support that role.

Transfer Pricing Must Follow What the Hub Actually Does

A regional hub often creates several new intercompany transactions.

The Singapore company may charge management fees. It may earn a trading margin. It may provide procurement services. It may finance subsidiaries. It may receive or pay royalties. It may undertake acquisition support or treasury functions.

Each of those transactions requires an economic explanation.

Under section 161 of the Income-tax Act, 2025, income, expenses and cost allocations arising from international transactions must be determined having regard to the arm’s-length price.

Suppose Singapore merely processes invoices and coordinates administration. A very large entrepreneurial margin may be difficult to justify.

But if the Singapore team negotiates supplier contracts, manages regional inventory, takes credit and market risks, employs senior commercial personnel and controls regional strategy, a more substantial return may be economically appropriate.

The legal label “regional headquarters” does not determine the transfer pricing outcome.

Functions, assets and risks do.

Profit Repatriation Can Become More Flexible, but Not Automatically Cheaper

A regional hub can also help manage how profits are redeployed across markets.

For example, dividends received by the Singapore hub from one subsidiary may, depending on the applicable Singapore tax rules and qualifying conditions, potentially be available for reinvestment into another regional business. Singapore provides exemptions or foreign tax credit mechanisms for qualifying foreign income received by resident companies.

Singapore also currently does not impose withholding tax on dividends paid by Singapore companies, which can simplify onward dividend flows.

But adding Singapore does not automatically reduce the group's global tax burden.

The subsidiary country may levy withholding tax when profits move to Singapore. Singapore tax treatment must then be analysed. The eventual payment to India must also be examined under Indian tax law and the India-Singapore treaty.

The correct comparison is therefore:

Direct route: Operating country → India

versus

Hub route: Operating country → Singapore → India

The hub route should win because of business and cash-management advantages, not because one withholding rate looks attractive in isolation.

FEMA Also Controls When Money Ultimately Becomes Due to India

A regional hub can retain and reinvest its own legitimate earnings subject to applicable foreign law and the structure of the group.

However, once an amount actually becomes receivable by the Indian investor from its foreign entity, FEMA introduces a clear repatriation requirement.

RBI requires dues receivable by an Indian person from a foreign entity in which ODI has been made, as well as qualifying disinvestment proceeds, to generally be realised and repatriated to India within 90 days from the relevant due date or transaction trigger.

A regional hub therefore creates flexibility over how the overseas business is organised.

It does not create a mechanism for indefinitely parking amounts that have already become legally due to India.

So When Should You Create the Hub?

A regional holding or operating entity usually deserves serious consideration when the group expects:

multiple overseas subsidiaries or acquisitions;

a genuine regional management or trading team;

centralised treasury or procurement;

regular reinvestment of overseas earnings;

regional supply-chain management;

shared commercial decision-making; or

future partial exits or strategic investors at the regional level.

By contrast, if the Indian company has one US subsidiary and one salesperson in Singapore, adding a Singapore holding company may simply increase cost and compliance.

There is no award for having the most sophisticated organisational chart.

Closing Perspective: Build the Hub When the Business Needs a Hub

Singapore, the UAE and other regional centres can be excellent platforms for Indian businesses expanding globally.

But the sequence matters.

Do not incorporate the regional hub first and search for its purpose later.

First understand where the group is expanding, where acquisitions will occur, where management should sit, how funding will move, where profits will be reinvested and what functions actually need to be centralised.

Then decide whether a regional entity improves the operating model.

Coal India’s reported Singapore move is interesting precisely because the proposed office appears connected with specific commercial objectives: trading, regional expansion and overseas mineral acquisitions.

That is the right way to think about an international hub.

The best holding structure is not the one with the lowest-looking tax rate. It is the one that makes the international business easier to operate, finance, govern and eventually monetise, while remaining defensible under FEMA, tax and transfer pricing rules.