The Hindu Business Line : FIPB rejects Forum Synergies’ proposal

New Delhi, Aug. 22 The Foreign Investment Promotion Board (FIPB) has rejected a proposal by the newly-established Forum Synergies (India) PE Fund Managers.

The proposal was for accepting contributions of up to $135 million from Mauritius-based offshore fund India Knowledge Manufacturing Company.Objections were raised by the Department of Revenue that the proposal may involve an alleged “treaty shopping” and possible “round tripping”.

Forum Synergies (India) is registered under the provisions of the Indian Trusts Act, and IL&FS Trust Company Ltd has been appointed as the trustee. Forum Synergies comprises three individuals — Mr Samir Inamdar, Mr Sudhir Kant and Mr Prashant Goyal.

“The investment strategy of the trust is to generate superior returns through long-term capital appreciation, largely though privately negotiated equity, quasi-equity and equity-related instruments of small and medium enterprises in the growth phase and pre-IPO companies with a sector focus on knowledge manufacturing in engineering and bio-technology,” sources said.

FIPB approval

Forum Synergies had sought FIPB’s approval to accept contribution of up to $135 million from India Knowledge Manufacturing Company into the trust under the FDI route; and to issue Class B and C units in the trust to the offshore entity. It also sought permission for India Knowledge Manufacturing Company to subscribe to units of the trust, and for the trust to make investments in securities of the Indian companies in line with FDI norms.

During the FIPB deliberation, the Department of Economic Affairs did not favour the proposal citing the lack of details about the offshore entity and said that the domestic entity was not registered as a VCF (venture capital fund). “DIPP (Department of Industrial Policy and Promotion) also did not support the proposal, while the Department of Revenue raised objection that the proposal involves treaty shopping and (that there is) also a possibility of round tripping,” sources said, adding that FIPB subsequently turned down the proposal.