Presently, venture capital funds (VCF) registered with the Securities and Exchange Board of India (Sebi) are permitted to invest in equity and equity-linked instruments of offshore venture capital undertakings, subject to a ceiling of $500 million.
Sebi has issued a Circular dated August 9 2007 clarifying that in relation to permissible investments in equity and equity-linked instruments of off-shore venture capital undertakings, the undertaking would denote a foreign company whose shares are not listed on any recognized Indian or foreign stock exchange.
Investments would be allowed only in companies with an overseas front office and back office operations in India, and would be subject to a cap of 10% of the investible funds of the VCF.
Allocation of the limits on investment would be on a first-come, first-served basis, subject to availability in the overall limit of $500 million. Sebi has further clarified that in the event a VCF wants to increase its investment limit, a fresh application would be dealt with on the basis of its date of receipt without any preference being granted to the VCF.
An applicant would be entitled to make allocated investments in offshore venture capital undertakings within a period of six months from the date of Sebi approval, after which Sebi would be entitled to allocate any unused limits to other VCFs or applicants with pending applications.
Sebi-registered domestic VCFs that want to invest in offshore venture capital funds, and would require prior approval from Sebi and separate authorization from the Reserve Bank of India, would not be necessary for these investments.