The capital markets regulator Securities and Exchange Board of India has clarified that Foreign Venture Capital Investors (FVCIs) can seek registration as Foreign Portfolio Investors (FPIs), subject to certain conditions.
The entity planning to register itself as FPI would be required to have a clear segregation of funds or securities which are proposed to be invested or held under the respective registrations, subject to fulfilment of conditions including segregation of holdings, SEBI said.
“The investment conditions and restrictions for an entity registered as FVCI under FVCI Regulations are different compared with the investment conditions and restrictions as prescribed for an entity registered as FPI under the FPI Regulations,” the note said.
Reporting of transactions would also have to be done separately, it added.
An FVCI is an investment vehicle that picks stake in early stage companies, providing the initial capital it requires. However, several Indian PE firms also operate as an FVCI.
SEBI made the clarification note based on a query by one of the designated depository participants whether an FVCI can be allowed to register as an FPI.
It may be noted that FPIs encompass all Foreign Institutional Investors (FIIs), their sub-accounts and Qualified Foreign Investors (QFIs).
SEBI also created a separate category of investors under Alternative Investment Funds. However, some PE firms and VC firms choose to invest in the country through the FVCI or FPI route.