Sebi doubles overseas investment limit of AIF, VCF to USD 1,500 mn

New Delhi, May 22 (PTI): Markets regulator Sebi doubled the overseas investment limit of alternative investment funds and venture capital funds to USD 1,500 million.
This move would allow greater Indian participation in global companies and would accelerate the growth of the Indian AIF industry overall, said 3one4 Capital founding partner Siddarth Pai.
The decision has been taken in consultation with the Reserve Bank of India, the Securities and Exchange Board of India (Sebi) said in a circular.
Currently, Sebi-registered alternative investment fund (AIF) or venture capital fund (VCF) are permitted to invest overseas, subject to an overall limit of USD 750 million.
“…the said limit has now been enhanced to USD 1,500 million,” Sebi noted.
Pai, who is the co-chair of regulatory affairs committee at IVCA that presented this paper to Sebi, said doubling of the overseas investment allowance to USD 1.5 billion will enable Indian AIFs to invest overseas and generate strong returns for their investors. Under the rules, AIFs and VCFs need to mandatorily disclose the utilisation of overseas investment limits within five working days of such usage on the market regulator”s intermediary portal.
In case an AIF or venture capital fund (VCF) has not utilised the overseas limit granted them within 6 months from Sebi’s approval, the same needs to be reported within two working days after expiry of the validity period.
Further, if an AIF or VCF wishes to surrender the overseas limit at any point of time within the validity period, the same needs to be reported within two working days from the date of decision to surrender the limit.
AIFs are funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre-decided policy, while VCFs are investment funds that manage the money of investors who seek private equity stakes in start-ups.
Pai said that the AIF industry in India has averaged a CAGR of 491.42 per cent from December 2012 to December 2020, reaching a cumulative size of 4.42 lakh crore, growing from strength to strength since its inception in 2012.
“In a highly globalized world, asset diversification in terms of geographies adds a significant alpha to a fund manager’s performance. In view of this, Sebi allows Indian AIFs to invest up to 25 per cent of their investable corpus (fund size minus expenses) overseas and created a USD 500 million allowance for overseas investments in 2015,” he said.