SEBI Slashes Approval Period For Overseas Investment By VCs, AIFs To 4 Months

SEBI Changes Market Cap Math, Opts For 6-Month Average

SUMMARY

The order was issued to protect the interests of investors and to regulate as well as promote the development of the securities market

The decisions were taken based on the recommendations of SEBI’s alternative investments policy advisory committee

This comes a year after SEBI issued guidelines that allowed AIFs and VC firms to invest in overseas companies without any India connection

The Securities and Exchange Board of India (SEBI) on Friday (August 4) slashed the validity period of approval granted to alternative investment funds (AIFs) and venture capital (VC) funds to make overseas investments from six months to four months.

As per the note, SBI will continue to hold the prerogative to allocate unutilised investment limits of approved AIFs and VC funds to other applicants. The move will enable AIFs and VC funds to utilise allocated limits efficiently.

“… it has been decided to reduce the aforesaid time limit for making overseas investments by AIFs/VCFs from six months to four months so that the allocated limit is utilised efficiently and, if unutilised, the same is again available to the AIF industry in a shorter time span,” the markets watchdog said in a circular.

The decisions were taken based on the recommendations of SEBI’s alternative investments policy advisory committee. The new validity period will be applicable to approvals granted by SEBI post the issuance of the circular.

As per the markets watchdog, the order was issued to protect the interests of investors as well as to regulate and promote the development of the securities market. The circular was issued under Section 11(1) of the SEBI Act, 1992.

This comes a year after the SEBI issued guidelines allowing AIFs and VC firms to invest in overseas companies without any connection to India. Prior to that, such funds could only invest in foreign entities that had at least one office in India.

Back then, the validity threshold of approval was set at six months. With the new development, more and more VC firms and AIFs will be able to effectively join the bandwagon and invest in companies globally.

Meanwhile, SEBI has ramped up its focus on the homegrown startup ecosystem and the allied investor landscape. Recently, Mamaearth received SEBI’s green light to float its IPO, with ideaForge making a stunning debut on the Indian bourses.

The market regulator is also keeping a close watch on upstream investors or LPs in AIFs. It has directed the trustees of such funds to find out the proportion of ‘high-risk’ clients and non-profit organisations in each VC fund.

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