Sebi allows foreign venture funds in infra investment firms
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Mumbai: Market regulator Sebi has notified new norms that will allow Foreign Venture Capital Investors (FVCIs) in Core Investment Companies (CICs) for infrastructure sector to help attract overseas funds. The move will remove any hindrance to investment in the infrastructure sector through the FVCI route and to boost the infrastructure sector in the country.
According to the 12th Five Year Plan (2012-17), India requires Rs.65 lakh crore investment in infrastructure. These regulations will be called Foreign Venture Capital Investors (Amendment) Regulations and will come into force with immediate effect, Securities and Exchange Board of India (Sebi) said in a notification on Tuesday.
This notification is based on the fact that CICs are essentially holding companies and do not engage in financing activity similar to other NBFCs. Therefore, the new norms do not go against the intent of the FVCI Regulations of not allowing FVCI investment in non-banking financial services. The final norm has been put in place after taking into account public comments on the proposal issued by Sebi last month.
Currently, Sebi’s FVCI norms do not permit these foreign funds to invest in Non-Banking Financial Services (NBFCs). Therefore, FVCIs are not allowed to invest in CICs under the FVCI Regulations since CICs are classified as NBFCs by RBI.
Sebi has actively encouraged setting up of varied frameworks for investment in infrastructure so that the lack of structures for financing of infrastructure is not an impediment to the development of the sector.
FVCIs are investors incorporated and established outside India and invest primarily in venture capital undertakings in India either directly or through venture capital funds or alternative investment funds (AIFs). As on 30 September 30, there are 197 FVCIs registered with Sebi with a cumulative net investment of Rs.42,776 crore.