INDIA Law and Practice Contributed by: Divyanshu Pandey, Utsav Johri, Sucheta Bhattacharya and Nishal Makharia, JSA Advocates & Solicitors
VRR Route • The minimum investment of an FPI during the retention period should be 75% of the limit allotted to the FPI under the VRR Route (Committed Portfolio Size). The minimum retention period for an investment by an FPI under the VRR Route is three years, and such period commences from the date of allotment of limit. • FPIs are required to invest at least 75% of the Committed Portfolio Size within three months from the date of allotment of limit to the FPI. • FPIs may redeem their investments and re-invest the proceeds as long as the above conditions are met. It should also be noted that the minimum tenure requirement, the concentration limit and the single/group investor-wise limits applicable to FPI invest - ments in NCDs under the Normal Route do not apply. • The limits under the VRR Route can be obtained through an auction process for allot - ment of investment amounts under the VRR Route. Any investment by an FPI in NCDs, if not made through the VRR Route, must comply with the concentration limits and the single or group investor limits prescribed by RBI. If the NCDs are listed on a stock exchange in India, they cannot be subject to a put or call option that can be exercised for a period of one year from the date of their issuance. In addition, one needs to keep in mind that NCDs with origi - nal maturity of less than one year are subjected to the separate regulatory framework of RBI. Other Instruments Private credit funds can also invest in Securi - tised Debt Instruments (SDIs), which are finan - cial products where loans or receivables are
pooled, converted into marketable securities, and sold to investors. Other forms of structures for investment by pri - vate credit funds include compulsorily convert - ible debentures (CCDs) and optionally converti - ble debentures (OCDs). In India, foreign investors are allowed to invest in CCDs under the FEMA and the guidelines in relation thereto. Any invest - ment by a foreign investor in any optionally con - vertible instrument is treated as an ECB. Private credit providers in India provide delayed draw facilities by offering an elongated availabil - ity period. Revolving credit structures are not as common in private credit transactions. 3.2 Key Documentation The key documents involved in a private credit transaction depend on the type of credit being provided. If the financing is by way of the issuance of NCDs, the key documents include the following: • debenture trust deed; • debenture trustee agreement; • disclosure documents (Form PAS-4 for unlisted NCDs and general information docu - ment and key information document for listed NCDs); • intercreditor agreement, if required; and • in the event of a secured NCD and depending on the type of security, deed of hypotheca - tion, indenture of mortgage/memorandum of entry, and share/securities pledge agreement. In debt transactions, if an entity has multiple lenders, it is likely that the lenders would like to enter into intercreditor agreements. Any inter - creditor agreements executed between the lend - ers are negotiated between them. For listed debt
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