March 19, 2012:
PE/VC funds are registered in India as venture capital funds (VCFs) or Foreign Venture Capital Investment (FVCI) with the market regulator Securities & Exchange Board of India (SEBI).
Presently, a SEBI registered Foreign Venture Capital Investor (FVCI) may invest in equity, equity linked instruments, debt, debt instruments, debentures of an Indian Venture capital Undertaking (IVCU) or of a Venture Capital Funds (VCF) through Initial Public Offer or Private Placement or in units of schemes / funds set up by a VCF.
Reserve Bank of India (RBI) has relaxed regulations and decided, to allow FVCIs to invest in the eligible securities (equity, equity linked instruments, debt, debt instruments, debentures of an IVCU or VCF, units of schemes / funds set up by a VCF) by way of private arrangement / purchase from a third party also.
RBI has also clarified that SEBI registered FVCIs would also be allowed to invest in securities on a recognized stock exchange subject to the provisions of the SEBI (FVCI) Regulations, 2000.
This will make FVCI the more favoured route rather than FIIs, which is being used by several private equity and venture capital funds at this point of time.
