Procedure for reclassification of FPI investment to FDI
Summary
This circular modifies the procedure for reclassifying Foreign Portfolio Investor (FPI) holdings to Foreign Direct Investment (FDI) when the 10% threshold is reached. It mandates that Custodians report the FPI's intent to SEBI and freeze purchase transactions until reclassification is complete. The process requires the Custodian to transfer equity instruments upon confirmation that RBI reporting requirements are fully satisfied.
Text
In case the investment made by a Foreign Portfolio Investor (along with its investor group) reaches 10% or more of the total paid up equity capital of a company on a fully diluted basis and the FPI (along with its investor group) intends to reclassify its FPI holdings as Foreign Direct Investment (FDI), it shall follow extant FEMA Rules and circulars issued thereunder in this regard.
Pursuant to receipt of such intent from the FPI, the respective Custodian shall report the same to the Board and freeze purchase transactions by such FPI in equity instruments of such Indian company, till completion of the reclassification.
On receipt of request from the FPI for transfer of the equity instruments of such Indian company from its FPI demat account to its demat account maintained for holding FDI investments, the Custodian shall process the request if the reporting for reclassification, as prescribed by RBI, is complete in all respects.
The provisions of this circular shall come into force with immediate effect.
Source: SecMarx — Procedure for reclassification of FPI investment to FDI. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.