Key terms related to Foreign Venture Capital Investment in India are as follows:
“Foreign Venture Capital Investor” means an investor incorporated and established outside India, is registered under SEBI (Foreign Venture Capital Investors Regulations, 2000 and proposes to make investment in accordance with these Regulations;
‘Sectoral Cap’ is the maximum investment including both foreign investment on a repatriation basis by persons resident outside India in capital instruments of a company or the capital of an LLP, as the case may be, and indirect foreign investment, unless provided otherwise. This shall be the composite limit for the investee Indian entity.
Investment by Foreign Venture Capital Investor (FVCI)
Investment by an FVCI was permitted with effect from December 26, 2000
Sectors Where Investment is Allowed
An FVCI is permitted to invest in securities (not listed on a recognised stock exchange at the time of issue), of an Indian company engaged in the following sectors:
- IT related to hardware and software development
- Seed research and development
- Research and development of new chemical entities in pharmaceutical sector
- Dairy industry
- Poultry industry
- Production of bio-fuels
- Hotel-cum-convention centres with seating capacity of more than three thousand.
- Infrastructure sector. The term ‘Infrastructure Sector’ has the same meaning as given in the Harmonised Master List of Infrastructure sub-sectors approved by Government of India vide Notification F. No. 13/06/2009-INF dated March 27, 2012 as amended/ updated.
Investment in Startup
An FVCI can invest in securities issued by a startup, irrespective of the sector in which the startup is engaged.
Acquisition of units of other Venture Capital Fund etc.
An FVCI can acquire units of a Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund (Cat-I AIF) or units of a scheme or of a fund set up by a VCF or by a Cat-I AIF.
Investment subject to Sectoral Caps etc.
Investment by an FVCI in capital instruments of an Indian company will be subject to the reporting, sectoral caps, entry routes and attendant conditions.
Purchase of Securities etc.
An FVCI may purchase the securities/ instruments permitted for it either from the issuer of these securities/ instruments or from any person holding these securities/ instruments.
Investment in Listed Securities
An FVCI may invest in securities on a recognized stock exchange subject to the provisions of the Securities and Exchange Board of India (FVCI) Regulations, 2000.
Acquisition/Transfer of Securities
An FVCI may acquire/ transfer securities/ instruments permitted for it at a price that is mutually acceptable to the buyer and the seller/ issuer. In case of sale to a person resident outside India, the buyer should be an eligible acquirer.
Proceeds of Liquidation of VCFs etc.
An FVCI may also receive the proceeds of the liquidation of VCFs or of Cat-I AIFs or of schemes/ funds set up by the VCFs or Cat-I AIFs.
Mode of Payment
The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee (SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
The foreign currency account and SNRR account shall be used only and exclusively for transactions under this annex.
Remittance of Sale/ Maturity Proceeds
The sale/ maturity proceeds (net of taxes) may be remitted outside India or may be credited to the foreign currency account or SNRR account of the FVCI.
- Foreign Exchange Management
- Purchase/Sale of Capital Instruments of Indian Company by Person Resident Outside India
- Purchase/Sale of Capital Instruments by Foreign Portfolio Investors
- Purchase/Sale of Capital Instruments of Listed Company by NRI/OCI on Repatriation Basis
- Investment in India on Non-Repatriation Basis
- Purchase/Sale of Other than Capital Instruments by Person Resident Outside India
- Foreign Investment in LLP
- Foreign Investment Reporting in India