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9 June, 2017
In a move to increase the influx of foreign funds in Indian capital markets, the Securities and Exchange Board of India (“SEBI”), has vide its notification dated May 23, 2017 (“IFSC Notification”), permitted portfolio managers, alternative investment funds and mutual funds operating in the International Financial Services Centre’s (“IFSC”), to invest in securities issued by companies incorporated in India. The investments will be subject to such conditions or guidelines that may be stipulated or issued by the Reserve Bank of India and the Government of India from time to time.
The IFSC Notification stipulates that the portfolio managers, alternative investment funds and mutual funds investing from the IFSC will have to invest through the foreign portfolio investor route.
Prior to this IFSC Notification, portfolio managers, alternative investment funds and mutual funds operating in the IFSC could only invest in securities issued by companies incorporated in the IFSC, securities listed on a stock exchange incorporated in the IFSC and securities issued by foreign companies.
The ability for portfolio investors and funds to invest in Indian securities from the IFSC has the potential of acting as a driver to attract larger investments in India. The move will also facilitate the establishment of fund houses and offices within the IFSC as against in offshore jurisdictions. A substantial number of offshore fund vehicles are set up and operate from Singapore and Mauritius. Given the revision to tax structure and the higher operational costs in such offshore jurisdictions, such entities may be attracted to the potential of setting up from the IFSC. However, guidelines and conditions stipulated by the RBI and the government will need to be considered prior to making any shift in jurisdiction or routing of investments through the IFSC.
For further information, please contact:
Sameer Sibal, Partner, P & C Legal
sameer@pclegal.net
