FPI-FDI transition to give overseas funds more elbow room

To pave way for higher exposure to startups, midsized firms

- KHUSHBOO TIWARI

With the new operational framework for reclassifying foreign portfolio investors (FPI) as foreign direct investment (FDI) upon breaching the 10 per cent threshold, certain overseas funds are set to get more flexibility in their India investments, experts said.

There are around 17 companies listed on the National Stock Exchange (NSE) where a single FPI has holdings of up to 9 per cent, according to data provided by Primeinfobase. A majority of these are based out of popular jurisdiction destinations such as Mauritius and Singapore.

These investors, if they wish to take their holdings above 10 per cent in an investee company, will now also have the option to either divest stake or reclassify as FDI upon approval from the government.

"This relaxation meets one of the demands of certain funds which want to take a higher exposure in Indian companies especially mid-caps where the 10 per cent limit became restrictive. The enabling framework can now be implemented because the operational process has been specified," said Rajesh Gandhi, partner, Deloitte.