FPIs investment in securities to be part of $51 billion debt cap

Market regulator Sebi today said investments by Foreign Portfolio Investors (FPIs) in non-convertible shares or debentures will be included within the $51 billion limit meant for corporate debts.

The investments by FPIs in non-convertible shares or debentures "shall be reckoned against the corporate debt investment limits ($51 billion)," Securities and Exchange Board of India (Sebi) said in a circular.

FPIs are permitted to invest on repatriation basis, in non-convertible/redeemable preference shares or debentures issued by an Indian company.

An Indian company is permitted to issue non-convertible share, redeemable preference shares or debentures to non-resident shareholders, including the depositories that act as trustees for the American Depository Receipts (ADR)/Global Depository Receipts (GDR) holders by way of distribution as bonus from its general reserves.

The FPI regulations, which has come into effect from this month, brings together all foreign investor classes such as Foreign Institutional Investors (FIIs), their sub-accounts and Qualified Foreign Investors (QFIs).

Under the new norms, FPIs have been divided into three categories as per their risk profile and the KYC (Know Your Client) requirements and other registration procedures would be much simpler for FPIs compared to current practices.

The Category I FPIs, which would be the lowest risk entities, would include foreign governments and government related foreign investors.

Category II FPIs would include appropriately regulated broad-based funds, appropriately regulated entities, broad- based funds whose investment manager is appropriately regulated, university funds, university related endowments and pension funds.

The Category III FPIs would include all others not eligible under the first two categories.