Brief Overview:
Foreign Portfolio Investor (“FPI”) crossing equity investment threshold (currently being at 10%) is required to either (a) disinvest the excess holdings; or (b) have its entire holding re-classified to Foreign Direct Investment (“FDI”). The process for doing so has been notified.
Technical Details:
Reserve Bank of India (“RBI”) and Securities and Exchange Board of India (“SEBI”) have bought in an operational framework for reclassifying foreign portfolio investment as FDI when such investments by a FPI crosses the prescribed limits. Such reclassification is not permissible for sectors where FDI is prohibited or would result in a breach of applicable FDI limits.
FPIs shall (a) seek prior government approvals in case of investment from land bordering countries, (b) concurrence of the relevant parties including approval of the investee company, (c) making reporting to the custodian and (d) undertake the necessary filings with the relevant regulatory authorities.
All investment of a FPI in the concerned company shall be classified as FDI from the day of breach of the threshold and shall continue to be classified as such even if it falls below the prescribed limit subsequently.
Key Takeaway:
Introduces flexibility for a FPI to convert investment as a FDI.
For further details, please see:
RBI | Notification dated 11th November 2024
SEBI | Circular dated 11th November 2024
For any queries / clarifications, please feel free to ping us and we will be happy to chat:
