INSUBCONTINENT EXCLUSIVE:
MUMBAI: Local business houses and financial services groups will find it easier to rope in foreign partners to carry out fund management
activities in India with the capital market regulator, Sebi, clearing the fog caused by a new rule.
The Securities and Exchange Board of
spare the sponsors and managers of these funds from a recent government rule that foreign direct investment (FDI) in unregulated financial
services cannot be less than $20 million.
AIFs are money pooling vehicles for venture capital funds, private equity houses, real estate and
hedge funds, besides others
not currently regulated by any of the financial services regulators
However, it made little difference.
This changed with a mid-April notification, which made things difficult for companies, institutions and
fund managers planning to tie-up with global partners for AIFs
rule virtually shut the doors for FDI to most AIFs as very few foreign investor, no matter how large, would bring in as much as $20 million
in the manager/sponsor entity
pump in a minimum capital of $20 million
The ambiguity created by the finance ministry release which treated any unregistered/non-licensed financial services player akin to being
unregulated and in turn subjected to an impractical minimum capitalisation, discouraged several Indian fund managers seeking foreign joint
financial services group as foreign partner
First, it could encourage overseas investors to put money into Indian AIFs
Second, the presence of a global investment manager could also attract local high net worth investors and institutions to invest in an AIF
According to Moin Ladha, parter at Khaitan Co, at the time of considering an AIF registration application, SEBI does consider the
qualification, infrastructure and fit and proper status of the sponsor and manager in addition to the main applicant entity
sponsors and managers from an FDI perspective
