SEBI on Tuesday said related entities investing from the same foreign jurisdiction will be considered as a single FPI for the purpose of determining their investment limit. There is a cap for FPI investment in companies in some sectors. The holding of all the FPIs related to each other will be considered for the cap. For instance, if there is a 10 per cent cap on investment in some companies, all the related FPIs together cannot hold more than 10 per cent.
SEBI’s move follows various stakeholders seeking guidance on clubbing of investment limits to be applied to foreign government and its related entities.
In case the same set of beneficial owner invests through multiple entities, such entities will be treated as part of the same investor group and their investment limits will be clubbed as a single foreign portfolio investor (FPI), SEBI said in a detailed set of frequently asked questions (FAQs).
Accordingly, the combined holding of all foreign government and its related entities from the same jurisdiction will be below 10 per cent of the total paid-up capital of the company.
“However, in cases where government of India enters into agreements or treaties with other sovereign governments and where such agreements or treaties specifically recognise certain entities to be distinct and separate, SEBI, may, during the validity of such agreements or treaties, recognise them as such, subject to conditions as may be specified by it,” SEBI said.
Besides, the World Bank Group - IBRD, IDA, MIGA and IFC - has been exempted from clubbing of the investment limits for the purpose of application of 10 per cent limit for FPI investments in a single firm.
According to SEBI, FPIs investing in breach of the prescribed limit need to divest their holdings within five trading days from the date of settlement of the trades causing the breach. Alternatively, the investment by such investors will be considered as investment under FDI.
However, FPIs need to immediately inform SEBI and Reserve Bank of India of such option, since they cannot hold equity investments in a particular company under both the FPI and the foreign direct investment (FDI) routes, simultaneously.