SEBI issues framework to club investment limits of foreign govt, related entities

PTI | | Updated on: Apr 10, 2018
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Markets regulator SEBI on Tuesday said two or more foreign government and its related entities from the same jurisdiction will be considered a single FPI for the investment cap of 10 per cent in a listed Indian company.

The move comes as various stakeholders have been seeking guidance on clubbing of investment limits to be applied to foreign government and its related entities.

In case the same set of beneficial owner invest through multiple entities, such entities will be treated as part of same investor group and their investment limits will be clubbed as single foreign portfolio investor (FPI), SEBI said in detailed set of frequently asked questions (FAQs).

Accordingly, the combined holding of all foreign government and its related entities from the same jurisdiction will be below 10 per cent of the total paid up capital of the company.

“However, in cases where government of India enters into agreements or treaties with other sovereign governments and where such agreements or treaties specifically recognise certain entities to be distinct and separate, SEBI, may, during the validity of such agreements or treaties, recognise them as such, subject to conditions as may be specified by it,” SEBI noted.

Besides, World Bank Group — IBRD, IDA, MIGA and IFC — have been exempted from clubbing of the investment limits for the purpose of application of 10 per cent limit for FPI investments in a single firm.

According to SEBI, FPIs investing in breach of the prescribed limit need to divest their holdings within five trading days from the date of settlement of the trades causing the breach. Alternatively, the investment by such investors will be considered as investment under FDI.

However, FPIs need to immediately inform of such option to SEBI and Reserve bank of India (RBI), since they cannot hold equity investments in a particular company under FPI and Foreign Direct Investment (FDI) route, simultaneously.

Published on April 10, 2018

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