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FVCIs likely to invest $10 Billion in Indian companies
By siliconindia
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Bangalore: Foreign Venture Capital Investors (FVCI) are all set to invest a big amount of money in Indian companies as 129 application from them with intention for investment have got regulatory clearance in the last four months. Collectively, these funds are estimated to have a potential to invest $10 billion in Indian companies, reported Business Standard.
The Securities and Exchange Board of Indian (SEBI) had amended the regulations for foreign venture capital funds and investors in April 2004, and since then several applications were filed with the market regulator.
However, the reserve bank of India (RBI) at that time did not give necessary clearance as there was a huge foreign capital inflow into the country, making it difficult to manage those funds. But, seeing a reverse trend among funds due to the recession, RBI has now started clearing such applications.
RBI pricing norms related to foreign direct investment are not applicable to FVCIs, and if their investment is for more than a year, then the post IPO lock-in is not applied to them, making it attractive to float FVCIs.
However, while approving these applications, the RBI has restricted their investment to nine sectors, including infrastructure, IT hardware, agriculture and poultry. These restriction is based on benefits available under section 10(23) fb of the Income Tax Act, which allows tax pass-through to venture funds. Commenting on this move by RBI, Indian Venture Capital Association Chairman Saurabh Srivastava said, "These restrictions should not be there and even the benefit of tax-through should be extended to all sectors."
