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Change in rules for VC-led firms urged

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Our Markets Bureau Mumbai
Last Updated : Jan 28 2013 | 2:26 AM IST
 The Securities and Exchange Board of India (Sebi) advisory committee on venture capital funds (VCFs) has suggested the removal of lock-in on shares after listing of a venture capital-funded undertaking.

 The panel has also suggested the reduction of the investment limit for VCFs in unlisted companies from 75 per cent to 66.67 per cent.

 The committee has widen the investment horizon of VCFs and proposed investments in real estates and non-banking finance companies in equipment leasing and hire purchase.

 Further, VCFs continue to enjoy tax exemption even after they receive foreign securities in lieu of domestic securities held by them in a venture capital undertaking.

 The Sebi panel, headed by Ashok Lahiri, chief economic advisor, ministry of finance, was set up to advice on matters relating to the development and regulation of VCF industry in the country.

 The committee has suggested the removal of gold financing from the negative list for VCFs and foreign venture capital investors (FVCIs).

 However, such financing should be restricted to gold financing for jewellery alone and not pure trade and speculation in gold.

 The committee has suggested that certain hybrid instruments, which are optionally convertible into equities, may be permitted as a class of investment instruments under the 66.67 per cent (now recommended) portion of the investible funds.

 The report, which has been placed on the Sebi website for public opinion, said the balance 33.33 per cent or less may be permitted to be invested in listed securities and this limit shall be achieved by the end of the life cycle of a fund.

 Also, the restriction on FVCIs to invest not more than 25 per cent of their investible funds in a single VCF may be removed.

 Further, a special purpose vehicle (SPV), which is mandated for investment in a venture capital undertaking, may be permitted to invest up to a maximum of 33.33 per cent of its investible funds.

 The committee said,

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First Published: Oct 16 2003 | 12:00 AM IST

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