INDIA Law and Practice Contributed by: Lalit Kumar, JSA Advocates and Solicitors
FDI FDI can be made by any person resident out - side India but only in permitted sectors in India. Currently, FDI is allowed in most sectors. FDI can be made under (i) Automatic Route (ie, no approval of the government of India is required to make FDI); and (ii) Government Approval Route (ie, prior approval of the government of India is required). Irrespective of the sector in which investment is made, if FDI is made (i) by an entity of a country sharing land border with India; or (ii) where the beneficial owner of an investment into India is situated in or is a citizen of any country sharing land border with India, FDI can only be made under the government approval route. Any investment, irrespective of the level of investment, in an unlisted Indian company quali - fies as an FDI. However, to qualify as FDI in listed companies, the minimum FDI must be at least 10%. Investments below 10% qualify as FPI, as provided below. Further, FDI must comply with certain other con - ditions and restrictions applicable to the particu - lar sector in which the FDI is made. In addition, FDI must comply with pricing guidelines, which means FDI cannot be at a price below the value of shares as determined by a valuer. FPI FPI investment means investment in equity shares of a listed company in India, provided the stake held is less than 10%. As mentioned above, any stake of 10% or more in a listed com - pany qualifies as FDI. To make FPI, the investor would need to obtain a certificate from the Secu - rities and Exchange Board of India (SEBI). This certificate is granted by a designated depository participant on behalf of SEBI, once the investor
meets prescribed eligibility criteria as provided by the SEBI regulations. There are various cate - gories of FPIs, such as: Category I FPI (including government and government-related investors, such as central banks, sovereign wealth funds, pension funds, university funds, regulated enti - ties such as insurance and re-insurance enti - ties, banks, asset management companies); and Category II FPI (including all categories other than Category I FPI such as endowments and foundations, charitable organisations, corporate bodies, family offices, individuals, unregulated funds in the form of limited partnership and trusts). FPI can invest in securities of listed or to be listed entities. FVCI FVCI means investment in “venture capital undertaking” (meaning a domestic unlisted com - pany, which is not engaged in certain prescribed activities such as financial services, gold financ - ing, etc) or investment in other domestic funds registered as alternative investment funds (as described below). It can also make investment: • not exceeding 33.33% of its investible funds in IPOs of “venture capital undertaking” ; • in debt instruments of a company in which FVCI has already made equity investment; and • in the preferential allotment of equity shares of a listed company subject to a lock-in period of one year. To make FVCI, the investor would need to obtain a certificate from the Securities and Exchange Board of India (SEBI). This certificate is granted by a designated depository participant on behalf of SEBI, once the investor meets prescribed eli - gibility criteria as provided by the SEBI regula - tions.
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