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SEBI plans to allow foreign venture capital investors (FVCI) to invest in core investment companies (CIC) which fund the infrastructure sector.
CICs are companies which have their assets predominantly as investments in shares for holding stake in group companies which is neither for trading nor for carrying on any other financial activity.
Currently, venture capital investors are not allowed to invest in non-banking financial services (with certain exceptions). CICs are classified by the RBI as non-banking financial companies.
The proposal has been endorsed by the Government and the RBI and is one of the recommendations of High Level Committee on Financing of Infrastructure, said SEBI.
A consultative paper for amending the SEBI venture capital regulations has been put out for this purpose. The proposal is expected to infuse funds into the infrastructure sector and FVCI funds had already invested over ₹20,000 crore or more than half their cumulative net investment in India’s infrastructure sector such as power, telecom, roads, bridges and urban infrastructure, said SEBI. According to 12th Five Year Plan, India requires an investment of about ₹65 lakh crore in the infrastructure sector between 2012 and 2017.
SEBI said the proposal was based on the fact that CICs were essentially holding companies and did not engage in financing activity similar to other NBFCs and, therefore, do not go against the intent of the FVCI regulations of not allowing FVCI investment in non-banking financial services.
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