Till now, Indian people had been making abroad investments
under the Liberalised Remittance Scheme, which comes with minimal compliance necessities.
Underneath the overseas alternate guidelines
notified by the government in August, funding into overseas corporations can solely be finished by way of the ODI route or below the newly launched abroad portfolio funding (OPI) programme.
Whereas the OPI route comes with simpler laws, it permits investments solely in overseas listed corporations. Therefore angel traders are unable to make use of this route as most startups are unlisted.
Trade needs the OPI path to cowl unlisted securities as effectively.
“The ODI route is smart when investments are made by company traders, because the ticket dimension of the investments justifies the compliance prices. The OPI route is smart when securities are listed,” stated Vivek Iyer, associate, Grant Thornton Bharat. He additionally recommended that “it could be worthwhile for the federal government to contemplate some quantity of liberalisation below the ODI route, holding in thoughts the angel traders”.
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Traders are required to furnish a number of paperwork to the Reserve Bank of India in the event that they use the ODI route. These embrace the valuation report of the overseas firm wherein the funding is to be made, together with statutory audit experiences.
In response to market contributors, the goal corporations are sometimes reluctant to share all such data with the angels who usually purchase solely small stakes in corporations — typically beneath 10%.
“The OPI laws, within the present type, deprive Indian traders in investing in promising new-age startups situated outdoors India, and in a approach closes the doorways for particular person Indian investments in future unicorns,” stated Amit Agarwal, associate, Nangia Anderson. “It might thus be a welcome step if the present OPI laws are rationalised to permit sure class of mature particular person traders to put money into unlisted securities outdoors India.”
It’s a widespread apply amongst prime angel traders to put money into overseas startups. Additionally, a number of the Indian startups have an abroad holding construction — the guardian firm is included abroad whereas the day-to-day operations are carried out by an Indian subsidiary. Even whereas investing cash into such startups, angel traders must make an ODI funding below the foundations.
“There was an expectation that the brand new regime would outline the parameters of portfolio funding in a approach that it could apply for unlisted corporations as effectively,” stated Moin Ladha, associate at Khaitan & Co. “We’re hopeful that this could be clarified by the use of the FAQs anticipated on the brand new ODI regime.”
A senior govt at a number one non-public fairness fund instructed ET that the problem was being confronted by all types of angel investments together with the syndicate investments, the place a number of angel traders pool cash and put money into a startup. “In such investments, the syndicate creates roll-up automobiles (RUV) and vendor banks have been taking a stance that even cash into an RUV must undergo ODI route,” the chief stated. “We now have already expressed over considerations with the regulators relating to difficulties being posted by the brand new overseas alternate guidelines,” he added.