Sebi proposes higher overseas investment by AIFs, VCs

Markets regulator Sebi today proposed allowing Alternative Investment Funds and Venture Capital Funds to invest up to 25 per cent of their investible funds in foreign companies having 'Indian connection'.
Among others, such entities would include companies having a front office overseas, but back office operations in India.
Currently, India-based VC funds are permitted to invest up to 10 per cent of their investible funds in Offshore Venture Capital Undertakings with Indian connection, which has now been proposed to be increased to 25 per cent.
For AIFs, there are no specific guidelines in place as of now with regard to the quantum of such investments.

Proposing new guidelines, Sebi said that AIFs may be allowed to invest in equity and equity-linked instruments of off-shore venture capital undertakings with Indian connection, subject to an overall limit of USD 500 million (combined limit for AIFs and VC Funds registered with Sebi).
The regulator has also proposed necessary safeguards for the investors by requiring greater disclosures about the associates and managers of the AIF.

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposals by May 7 this year.
The move follows Sebi receiving representations from the industry that there has been a major shift 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 more than existing 10 per cent limit," Sebi said.
It was represented before Sebi that such investments would provide opportunities to the funds to generate better returns globally, getting exposure to the international markets practices, etc.
"Further, it is anticipated that since such investments are required to have an Indian connection, such investments will generate indirect benefits to India through bringing in of non-debt creating foreign capital resources, technology upgradation, skill enhancement, new employment, etc," the proposal noted.