Private equity and venture capital firms have welcomed Securities and Exchange Board of India’s (SEBI) new guidelines which says that, investment firms can invest in overseas companies even if these companies don’t have an Indian connection. 

Prior to this, Indian VC firms could only invest in foreign companies that had an office in India. “AIFs (Alternative Investment Funds)/VCFs (Venture Capital Firms) may invest in securities of companies incorporated outside India subject to such conditions or guidelines that may be issued by the Reserve Bank of India and SEBI from time to time. The requirement of the overseas investee company to have an Indian connection has been done away with,” SEBI said in a circular earlier this week. 

Much needed easing

Commenting on the new guidelines,  Bala C Deshpande, Founder and Partner, MegaDelta Capital said, “SEBI’s latest guidelines are both time and market appropriate given that, there are some good companies based overseas but having significant operations in India. We welcome the progressive thinking with respect to AIF funds and believe clear frameworks continuously provided by the SEBI helps our industry immensely.”

MegaDelta Capital is an India focused mid-market growth fund which typically invests $15-25 million of growth equity in companies. Some of its investee companies include Firstcry, Nova, GoQii, Moneytrap, Naaptol amongst others.

Market appropriate

Adding to this, Dhianu Das, Co-founder, Agility Ventures said, “the latest guidelines by SEBI is a much needed easing of norms for the AIFs (Alternative Investment Funds) and VCFs (Venture Capital Funds). Providing proof of India connection was a task for VCFs and AIFs to get SEBI approval and many a times resulted in lost opportunities.

The easing of this requirement is a major relief in fuelling innovation and creating value for Indian investors. With the current geo-political situation, this new update will ensure much more investment incoming our way.”

An angel investor network, Agility Ventures’ network invests in start-ups or early-stage businesses in sectors such as education, technology, healthcare, e-commerce, automobiles, electric vehicles, robotics, agri-tech and manufacturing, among others.

SEBI also noted that AIFs/VCFs shall not invest in an overseas investee company, which is incorporated in a country identified in the public statement of Financial Action Task Force (FATF) as a jurisdiction having a strategic Anti Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply or a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with FATF to address the deficiencies.