A SEBI registered Foreign Venture Capital Investor has general permission from the Reserve Bank of India (RBI) to invest in a Venture Capital Fund (VCF) or an Indian Venture Capital Undertaking (IVCU).
These investments have to be in tandem with the subject and terms and conditions specified in Schedule 6 of RBI Notification.
These investments by SEBI registered Foreign Venture Capital Investor, would be subject to the SEBI regulation and sector specific caps of FDI.
Where can they invest?
Foreign Venture Capitalist can invest in equity, equity linked instruments, debt instruments and debentures. These investors can do so by private placement or through an initial public offer.
According to the RBI, at the time of granting approval, the Reserve Bank permits the Foreign Venture Capitalist to open a Foreign Currency Account and/or a Rupee Account with a designated branch of an Authorised Dealer Category Bank.
Foreign Venture Capitalists are also allowed to invest in securities on a recognized stock exchange.
The purchase / sale of shares, debentures and units can be at a price that is mutually acceptable to the buyer and the seller.
Indian banks can offer forward cover to Foreign Venture Capitalist to the extent of total inward remittance.
In case the Foreign Venture Capitalist has made any remittance by liquidating some investments, original cost of the investments has to be deducted from the eligible cover to arrive at the actual cover that can be offered.