Qualified Foreign Investors entry in the Indian Capital Markets: The Indian Government has recently permitted Foreign Investors termed as Qualified Foreign Investors ("QFIs") who meet prescribed Know Your Customer ("KYC") requirements to directly invest in the Indian equity market. This move is aimed to widen the class of investors, attract more foreign funds and reduce market volatility and to deepen the "Indian Capital Market". The Indian Government had already permitted QFIs access to the Indian Mutual Fund Schemes pursuant to the Indian Budget announcement in 2011-12. The Reserve Bank of India ("RBI") has now permitted QFI's to invest on repatriation basis under the Portfolio Investment Scheme ("PIS" Route) similar to Foreign Institutional Investors ("FIIs") in equity shares listed on the recognized stock exchanges and in equity shares offered to public in India. Both the Securities and Exchange Board of India ("SEBI") and the RBI have issued separate circulars to operationalize the QFI Scheme.
Eligibility Criteria: Only QFIs from jurisdictions which are compliant with Financial Action Task Force standards and with which SEBI has signed Multilateral Memorandum of Understanding under the International Organization of Securities Commission's shall be permitted to invest in equity shares under this Scheme. The Government has clarified that retail investors and trust from Gulf countries including Oman, Kuwait, Bahrain, UAE and Qatar will have direct access to equities. Further, in order to qualify as a QFI, the person should not be registered with SEBI as a Foreign Institutional Investor ("FII") or a sub-account. QFIs are permitted to:
2. Equity shares in public issues, to be listed on recognized stock exchanges in India
3. Listed equity shares through SEBI registered stock brokers, on recognized stock exchanges in India
4. Equity shares against rights issues
5. Sell equity shares which are held in their demat account through SEBI registered stock brokers
7. Bonus shares or receipt of shares on stock split/ consolidation
8. Equity shares due to amalgamation, demerger or such other corporate actions, subject to the investment limits
10. Tender Equity shares in
11. Open offer in accordance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
12. Open offer in accordance with SEBI (Delisting of Equity Shares) Regulations, 2009
13. Buyback by listed companies in accordance with SEBI (Buyback of Securities) Regulations, 1998
QFI Demat Account: A QFI can open only one demat account with any of the SEBI registered Qualified Depository Participants ("DP") and can purchase and sell equity shares through that DP only. The DP shall ensure that the same set of ultimate / end beneficial owners are not allowed to open more than one demat account as QFI. A QFI can however open trading accounts with one or more SEBI registered stock brokers. Entities having opaque structure i.e. the details of ultimate/ end beneficiary are not accessible or where the beneficial owners are ring fenced from each other or where the beneficial owners are ring fenced with regard to enforcement shall not be allowed to open demat account as QFI.
QFI Investment Limits: The individual and aggregate investment limit for QFIs is 5% and 10% respectively of the paid up equity capital of the Indian company at any point of time. These limits are over and above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India. In the event of breach, the QFIs due to whom the limit is breached shall mandatorily divest excess holdings within three working days of such breach.
Purchase and Sale mechanism: The QFI can place a purchase order with the DP mentioning all the prescribed details and remit the inward remittances from the designated overseas bank account of the QFI to the single rupee pool account maintained with the DP. The DP shall forward the purchase offer and the money to the SEBI registered stock broker as per the instructions of the QFI. The DP will ensure that the equity shares purchased on behalf of QFI are credited into the demat account of that QFI on the pay-out date. Likewise, on receipt of instructions from QFI regarding sale, the DP will place an order for sale of equity shares. The sale proceeds are required to be remitted to the designated bank's overseas account of the QFI within 5 working days, unless any fresh purchase of equity is made out of such receipts. Any actions such as dividend received (including dividend received on Indian Mutual Funds), buy back, delisting of shares and etc. wherein the pool account maintained with the DP is credited with funds, such funds must be remitted to the designated bank overseas account of the QFI within 5 working days, unless any fresh purchase of equity is made out of such receipts.
Governing Laws: The transaction of QFIs, for all purposes will be treated at par with that of Indian non- institutional investors with regard to margins, voting rights, public issue etc. However the QFI shall at all the times, in relation to his activities as QFI, subject themselves to the extant Indian laws, rules, foreign exchange regulations, and guidelines issued from time to time. An express undertaking to this effect shall be obtained by the DP. The QFI Scheme may be fine-tuned further with the advent of time and special circumstances. However the entry of QFIs as an eligible investor class in the Indian capital market is a welcome move and a positive step towards increasing foreign inflow into the country.
Income Tax makes disclosure of Foreign Assets mandatory: The Central Board of Direct Taxes ("CBDT") has vide a recent notification stipulated that Indian residents including those not ordinarily resident in India will need to disclose their foreign assets, foreign Bank accounts, overseas financial holdings and immovable properties whilst filing their Income Tax returns. Indian residents who hold signing authority for any accounts located outside India will also need to disclose their overseas assets. Further Individuals with income over INR 10 Lakhs or foreign assets will now be required to file electronic returns.
Investment by Foreign Venture Capital Investors ("FVCIs") liberalized: The Government has permitted FVCIs to invest in eligible securities (equity, equity linked instruments, debt, debt instruments, debentures of an Indian Venture Capital Undertaking or Venture Capital Find, units of schemes /funds set up by Venture Capital fund) by way of private arrangement/purchase from third party subject to stipulated terms and conditions. SEBI registered FVCIs have also been permitted to invest in securities of recognized stock exchanges subject to provisions of the SEBI (FVCI) Regulations 2000
New Committee to decide Drug Approvals: The Health Ministry has set up a new Committee i.e. The New Drug Advisory Committee ("NDAC") to approve new drugs. The NDAC replaces the Drug Controller General of India ("DCGI") who was the sole approver of new drugs in the Country. The NDAC will oversee the work of 12 committees whose responsibility is to review the files submitted by the industry and give approvals within 6 weeks. The NDAC has the final say for approving or rejecting new drugs.
Real Estate Investment Trusts: The New Investment Vehicle The real estate sector has witnessed a rapid economic growth in the recent years and has been at the forefront of the Government's agenda. The growing scale of operations of the corporate sector has increased the demand for commercial buildings and space including modern offices, warehouses, shopping centres, conference centres and etc. which propels with it a need to have investment vehicles such as Real Estate Investment Trusts ("REITs").
What are REITs? REIT is an "Investment Vehicle" which holds & manages large "Commercial Rent Earning Properties" on behalf of investors and distributes most of its profit as dividends. A REIT stock is similar to any other stock that represents ownership in an operating business & is listed & freely traded on stock exchanges. REITs were introduced in the US during the mid 1960s as a means of providing small investors the opportunity to participate in the benefits of ownership of large scale commercial real estate or mortgage lending. As REIT's gained popularity, several other countries i.e. Canada, Australia, Hong Kong, Singapore, France followed suit. Over the years REITs have demonstrated the ability to attract and effectively manage investments in the real estate sector globally. In India, the Securities and Exchange Bank of India ("SEBI") introduced the draft REITs regulations in December, 2007 to encourage and facilitate a healthy growth of REITs in India. However, these regulations could not be finalized for various reasons and hence SEBI reintroduced the Draft REITs Regulations, 2013, which were made public on 10th October 2013 for inviting stakeholders views. These Regulations are pragmatic and take into account most of the concerns of stakeholders and contain many positive features.