Foreign VC funds may wish to register with SEBI

The Indian media are flooded daily with explosive figures earned by venture capital investors. Increasingly, new domestic and offshore funds are being formed with a specific India and industry focus. One avenue open to investors is to set up a foreign venture capital (VC) fund in India.

The Securities and Exchange Board of India (SEBI) regulates domestic VC funds. In 2000 SEBI introduced the Foreign Venture Capital Investor (FVCI) regulations that govern offshore funds and specify investment criteria for private equity and offshore VC investors. Foreign VC funds can invest directly in India under the prevailing FDI policy or under the FVCI regulations.

For the latter, a foreign VC fund must register with SEBI. To encourage registrations, SEBI has provided certain benefits. FVCIs can invest in registered domestic venture capital funds or in a venture capital undertaking. This is a domestic, unlisted SEBI-registered fund whose activities do not fall within the government’s restricted list.

Priti Suri is the proprietor of PSA.