Sebi shortens timeline for AIFs, venture capital funds to invest overseas to four months

The circular added that the provisions given in it will apply to the overseas investment approvals granted by the regulator subsequent to the issuance of this latest circular.

The validity period of approval granted to alternative investment funds (AIFs) and venture capital funds (VCFs) to make overseas investments has been reduced from six months to four months.

If the funds do not make their investments within this time frame, the market regulator may allocate their unutilised limits to other applicant AIFs and VCFs, according to a circular issued by the Securities and Exchange Board of India (Sebi).

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Last August, Sebi issued guidelines that allowed AIFs and VCFs to invest in overseas companies without an India connection. Until then, they could only invest in companies that had atleast one India office.

This latest circular, issued on August 4, said that till now AIFs and VCs had a time limit of six months from the date of prior approval from Sebi for making the allocated investments in offshore venture capital undertakings.

But, after receiving recommendations of the Alternative Investments Policy Advisory Committee, the regulator stated that it has been decided to reduce the aforesaid time limit for making overseas investments by AIFs/VCFs from six months to four months. This has been done so that “the allocated limit is utilised efficiently and, if unutilised, the same is again available to the AIF industry in a shorter time span”.

The circular added that the provisions given in it will apply to the overseas investment approvals granted by the regulator subsequent to the issuance of this latest circular.

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In the guidelines for overseas investment by the funds, the regulator had said, “AIFs/VCFs shall invest in an overseas investee company, which is incorporated in a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to the bilateral Memorandum of Understanding with SEBI.”

The guidelines had been released on August 17, 2022.