Clubbing of investment limits explained

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The Securities and Exchange Board of India (SEBI) issued a circular on 10 April clarifying the clubbing of investment limits of foreign government-related entities registered as foreign portfolio investors (FPIs) under the SEBI (Foreign Portfolio Investors) Regulations, 2014. Some of the significant clarifications are as follows:

FPI investment limit. The purchase of equity shares of each company by a single FPI or an “investor group” shall be below 10% of the total paid-up capital of the company.

Investor group. In a case where the same set of beneficial owners are constituents of two or more FPIs and such investors have a common beneficial ownership of more than 50% in those FPIs, all such FPIs will be treated as forming part of a single investor group, and the investment limits applicable to a single FPI will operate with respect to all such entities by way of clubbing.

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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley, Munich and New York. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.

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