Money & Banking

Remove 25% investment ceiling on investee company: IVCA

KR Srivats New Delhi | Updated on August 21, 2018

Allow venture capital funds to invest in NBFCs, proposes white paper on venture capital industry

The Indian Private Equity and Venture Capital Association (IVCA) has made a pitch for the removal of the ceiling of 25 per cent of the investible funds of Alternative Investment Funds (AIFs) in a single investee company.

This recommendation forms part of the White Paper on Venture Capital Industry submitted to Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion (DIPP) on Tuesday. The white paper, jointly prepared by IVCA and PwC, discusses the issues and challenges faced by the start-up ecosystem in India.

It also recommended that alternatively, the investment threshold of 25 per cent may be considered to be increased with the approval of the super majority of 75 per cent investors in a single Venture Capital Undertaking.

As per the SEBI AIF regulation, Category-I and Category-IIs AIFs are not permitted to invest more than 25 per cent of the investible funds in one investment company.

It may be recalled that the ceiling of investment of not more than 25 per cent of the investible funds of the AIFs in one single investee company was introduced to meet the requirement of diversification of risks of AIFs.

The white paper has also, as part of its 25-odd recommendations, made a case for SEBI to allow venture capital funds to invest in companies registered as NBFCs, which now form part of the negative list as per the AIF regulations.

Published on August 21, 2018

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