Sebi hikes overseas investment limit for VCs from 10% to 25%

Caveat: enhanced limit applies to offshore funds having an Indian connection; they cannot invest in a JV or a wholly-owned subsidiary entity abroad

The Securities and Exchange Board of India (Sebi) on Thursday gave more room for foreign investment in venture capital (VC) funds, raising the limit from 10 per cent to 25 per cent.

This had been proposed in a consultation paper by Sebi in April. “Sebi has received several representations from the industry that there has been, in recent times, an increased interest of Indian entrepreneurs outside India. Many Indian entrepreneurs have been setting up their headquarters outside India, with back-end operations and/or research and developments being undertaken in India. Therefore, there is a need to allow higher overseas investment by VCFs beyond the existing 10 per cent limit,” the regulator said.

Sebi has increased the investment limit with a caveat that it will be permitted only in those offshore VC undertakings which have an Indian connection and these funds cannot invest in a joint venture or a wholly owned subsidiary entity abroad.

The norms follow Sebi receiving representations from the industry that there has been a major shift of Indian entrepreneurs outside India.

Earlier, a draft was issued in this regard. Many Indian entrepreneurs have been setting up their headquarters outside India with back-end operations or research and developments being undertaken in India.