Sebi proposes to allow venture funds to invest in Infra CICs

Currently, Sebi rules do not permit FVCIs to invest in NBFCs and RBI norms classify CICs as NBFCs

In order to further boost funding for infrastructure sector, the Securities and Exchange Board of India (Sebi) on Wednesday floated a discussion paper to allow Foreign Venture Capital Investors (FVCI) to invest in core investment companies (CIC) that are involved in infrastructure funding.

FVCIs are investors incorporated and established outside India investing primarily in venture capital undertakings in India.

As per Reserve Bank of India (RBI) definition, CICs have more than 90 per cent of their assets invested in shares for holding stake in group companies that are not meant for trading.

Currently, Sebi regulations, 2000 do not permit FVCIs to invest in Non-Banking Financial Services (NBFCs), and as RBI norms classify CICs as NBFCs, venture funds cannot invest in them.

"It is observed that the companies investing in infrastructure sector classified as CICs are not able to attract funds from FVCIs due to the aforesaid restriction," said the markets regulator in the discussion paper floated on Wednesday.

Sebi's proposal is also based on the fact that the securities regulator holds that CICs are holding companies are not involved in financing business similar to that of NBFC. This proposal has already been approved by the finance ministry and RBI.

As per Sebi data, there are 197 FVCIs registered with it, with a cumulative net investment of Rs 42,776 crore as on September 2014. FVCI investment in infrastructure sector currently is more than Rs. 20,000 crore.Sebi has invited comments from the market participants till November 15.