The Securities & Exchange Board of India (Sebi) has made it mandatory for registered venture capital funds (VCFs) to take its prior approval before investing in offshore venture capital undertakings. However, these VCFs will not be required to seek separate approval from Reserve Bank of India for this purpose.
In its circular issued on Thursday, Sebi said that VCFs could make investments only in foreign firms that have an Indian connection?specifically, companies that have a front office overseas, but back-office operations in India. ?Such investments would be up to 10% of the investible funds of a VCF,? the regulator has stated.
Earlier, Reserve Bank of India had permitted VCFs to invest in equity and equity-linked instruments in offshore venture capital undertakings, subject to an overall limit of $500 million and in accordance with Sebi regulations.
In its circular, Sebi said that the allocation of investment limits would be set on a first-come-first-served basis, depending on availability within the overall $500 million limit.
A VCF applicant will have a time frame of six months for making allocated investments in offshore venture capital undertakings. Sebi may allocate the unutilised limit to the next VCF in case the previous applicant does not utilise the limit allocated in the stipulated period of six months from the date of approval, the markets regulator added.
?If a VCF, which is allocated a certain limit, wishes to invest more funds, fresh approval is needed. The application will be dealt with on the basis of the date of receipt and no preference shall be granted in the fresh allocation of investment limit,? the Sebi circular adds.
Sebi has said these investments would be governed by directions issued by the apex bank from time to time. The circular is being issued in accordance with sub-section (1) of Section 11 of the Sebi Act of 1992.