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SEBI allows foreign venture funds to register as FPIs

Bombay Stock exchange - flickr

The Securities and Exchange Board of India (SEBI) has allowed allowed foreign venture capital investors (FVCI) to be registered as foreign portfolio investors (FPI) if they meet certain guidelines, it said in a notification.

A foreign venture capital investor can be defined as an investor established outside of India who can invest either in a domestic venture capital fund or a venture capital undertaking (domestic unlisted company), while FPI comprises FIIs, sub-accounts and Qualified Foreign Investors.

The markets regulator was responding to a query from a Designated Depository participant and added that it does not “expressly prohibit FVCI from holding registration as a FPI.”

“The investment conditions and restrictions for an entity registered as FVCI under FVCI Regulations are different as compared to the investment conditions and restrictions as prescribed for an entity registered as FPI under the FPI Regulations. Thus, such an entity would be required to have a clear segregation of funds/securities which are proposed to be invested/held under the respective registrations,” the notification said.

Other caveats include clear segregation of funds raised, allocated and invested for both registrations and that reporting of transactions must be done separately and there should be clear segregation of securities held under FVCI and FPI registrations.

Earlier in December, SEBI also allowed FVCIs to invest in the infrastructure sector to help attract overseas funds in the space.

Norms for listing startups

Earlier in March SEBI proposed an alternative capital raising platform (pdf) making it easier for startups in India to raise funds through initial public offerings (IPOs). The markets regulator had recommended setting up an institutional trading platform (ITP) for companies to list and relaxed post-listing lock-in for major shareholders of these firms and eased disclosure requirements that IPO-bound companies have to make in their issue prospectus on how they plan to use the money from the offering.

The regulator also relaxed disclosure norms by allowing startups to state the main object of the issue for general corporate purpose. The regulator said the disclosure may be restricted to only broad objects in line with major international jurisdictions.

Image credit: Flickr user Nicolas Mirguet

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