VCCircle

Indian market regulator Securities and Exchange Board of India has issued foreign investment norms for venture capital funds who have registered with the body. First, the SEBI-registered VC funds are allowed to invest only in those companies which have an Indian connection, for example, the companies which have back office operations in India. Besides, the funds cannot invest more than 10 per cent of their corpus in these companies. So if you are $150 million fund, you can't invest more than $15 million in an American company which uses India as a back office.

And SEBI will allow only a total of $500 million a year to be invested abroad. So VC funds have to approach the regulator for approval, and they will be given permission on a first cum first basis till they exhaust the $500-million limit. The guidelines were issued on Thursday. These norms apply only to those funds who are registered with SEBI, and not for those come via Mauritius or Cyprus.

In April, India's central bank Reserve Bank of India (RBI) had approved the proposal of VCFs investing in equity and equity-linked instruments in offshore venture capital undertakings (companies) subject to an overall limit of $500 million and applicable SEBI regulations.

Currently, there are some about 90 domestic and 80 foreign venture capital funds registered with SEBI.

See the full announcement below: