Foreign venture capital investors may also register as FPIs

An FVCI is an investment vehicle that backs early-stage companies, providing the required initial capital, in return for a stake in the venture

The Securities and Exchange Board of India has clarified that foreign venture capital investors (FVCIs) may seek registration as foreign portfolio investors (FPIs). They can do so subject to fulfilment of conditions, including segregation of holdings, according to a note on the regulator’s website.

An FVCI is an investment vehicle that backs early-stage companies, providing the required initial capital, in return for a stake in the venture. An FPI is largely used to funnel investments into Indian equity and debt. Equity investments are largely into mature companies that have already achieved a certain scale and listed themselves on Indian stock exchanges.

The regulator had recently allowed depositories to undertake registration of such FPIs. One of these had written to the regulator, asking if an FVCI can be allowed to register as an FPI.  The regulator has clarified that this is permissible, so long as eligibility criteria are met, and the funds and securities belonging to the venture capital division is held separately from the FPI arm. Accounting and transaction would also have to be done separately.

“…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,” said the Sebi note.