INVESTMENT CONDITIONS AND RESTRICTIONS Of Foreign Portfolio Investor :
INVESTMENT RESTRICTIONS
– A foreign portfolio investor shall invest only in the following securities, namely-
– Securities in the primary and secondary markets including shares, debentures and warrants of companies, listed or to be listed on a recognized stock exchange in India;
– Units of schemes floated by domestic mutual funds, whether listed on a recognized stock exchange or not;
– Units of schemes floated by a collective investment scheme;
– Derivatives traded on a recognized stock exchange;
– Treasury bills and dated government securities;
– Commercial papers issued by an Indian company;
– Rupee denominated credit enhanced bonds;
– Security receipts issued by asset reconstruction companies;
– Perpetual debt instruments and debt capital instruments, as specified by the Reserve Bank of India from time to time;
– Listed and unlisted non-convertible debentures/bonds issued by an Indian company in the infrastructure sector, where ‘infrastructure’ is defined in terms of the extant External Commercial Borrowings (ECB) guidelines;
– Non-convertible debentures or bonds issued by Non-Banking Financial Companies categorized as ‘Infrastructure Finance Companies’ (IFCs) by the Reserve Bank of India;
– Rupee denominated bonds or units issued by infrastructure debt funds;
– Indian depository receipts; and
– Such other instruments specified by SEBI from time to time.
– Where a foreign institutional investor (FII) or a sub account, prior to commencement of these regulations, holds equity shares in a company whose shares are not listed on any recognized stock exchange, and continues to hold such shares after initial public offering and listing thereof, such shares shall be subject to lock-in for the same period, if any, as is applicable to shares held by a foreign direct investor placed in similar position, under the policy of the Government of India relating to foreign direct investment for the time being in force.
– In respect of investments in the secondary market, the following additional conditions shall apply:
(a) A foreign portfolio investor shall transact in the securities in India only on the basis of taking and giving delivery of securities purchased or sold;
(b) Clause (a) shall not apply to, in case of :
– Any transactions in derivatives on a recognized stock exchange;
– Short selling transactions in accordance with the framework specified by SEBI;
– Any transaction in securities pursuant to an agreement entered into with the merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009;
– Any other transaction specified by SEBI.
(c) No transaction on the stock exchange shall be carried forward;
(d) The transaction of business in securities by a foreign portfolio investor shall be only through stock brokers registered by SEBI.
(e) Clause (d) shall not apply to, in case of :
– transactions in Government securities and such other securities falling under the purview of the RBI.
– sale of securities in response to a letter of offer sent by an acquirer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
– sale of securities in response to an offer made by any promoter or acquirer in accordance with SEBI (Delisting of Equity shares) Regulations, 2009;
– sale of securities, in accordance with SEBI (Buy-back of securities) Regulations, 1998;
– divestment of securities in response to an offer by Indian Companies in accordance with Operative Guidelines for Disinvestment of Shares by Indian Companies in the overseas market through issue of ADR or GDR as notified by the Government of India and directions issued by RBI from time to time;
– any bid for, or acquisition of, securities in response to an offer for disinvestment of shares made by the Central Government or any State Government;
– any transaction in securities pursuant to an agreement entered into with merchant banker in the process of market making or subscribing to unsubscribed portion of the issue in accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009;
(f) A foreign portfolio investor shall hold, deliver or cause to be delivered securities only in dematerialized\ form. However, any shares held in non-dematerialized form, before the commencement of these regulations, can be held in non-dematerialized form, if such shares cannot be dematerialized.
– In respect of investments in the debt securities, the foreign portfolio investors shall also comply with terms, conditions or directions, specified or issued by SEBI or RBI, from time to time, in addition to other conditions specified in these regulations.
– Unless otherwise approved by SEBI, securities shall be registered in the name of the foreign portfolio investor as a beneficial owner for the purposes of the Depositories Act, 1996.
– The purchase of equity shares of each company by a single foreign portfolio investor or an investor group shall be below ten percent of the total issued capital of the company.
– The investment by the foreign portfolio investor shall also be subject to such other conditions and restrictions as may be specified by the Government of India from time to time.
– In cases where the Government of India enters into agreements or treaties with other sovereign Governments and where such agreements or treaties specifically recognize certain entities to be distinct and separate, SEBI may, during the validity of such agreements or treaties, recognize them as such, subject to conditions as may be specified by it.
– A foreign portfolio investor may lend or borrow securities in accordance with the framework specified by SEBI in this regard.