Foreign venture capital investors (FVCI) will be allowed to invest in startups 10 sectors including IT related to hardware and software development, nanotechnology, seed research and development without the Reserve Bank of India’s approval, according to a notification.
These investors will be allowed to invest in equity or equity linked instrument or debt instrument issued by an Indian company whose shares are not listed on a recognised stock exchange.
The sectors include:
- IT related to hardware and software development
- seed research and development
- research and development of new chemical entities in pharma
- dairy industry
- poultry industry
- production of biofuels
- hotel and convention centres with a capacity of more than 3,000
- infrastructure segment
This applies to all FVCIs registered under the Securities and Exchange Board of India (FVCI) Regulations, 2000.
There will be no restriction on transfer of any security/instrument held by the FVCI to any person resident in or outside India. An startup receiving investment directly from a registered FVCI will be required to report the investment in form FC-GPR. The RBI mentions that changes are being made to the e-biz portal and separate instructions will be provided on completion, enabling reporting online.
Note that the notification defines a startup as an entity that has been incorporated or registered in India for less than 5 years, with an annual turnover under Rs 25 crore in any preceding financial year and working towards “innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.”