QFIs: A welcome move by SEBI for foreign investors

The Securities and Exchange Board of India (SEBI), through a circular dated 13 January, allowed qualified foreign investors (QFIs) to invest in the Indian equity market. The decision to open the equity market to this class of investors had been announced by the Ministry of Finance in a press release dated 1 January.

The circular extends the permitted investment areas for QFIs from investment in mutual fund schemes and bonds for infrastructure (introduced by SEBI on 9 August 2011), to investments directly in listed Indian companies on the floor of the stock exchange, public issues, rights issues, etc. QFIs are now also allowed to tender equity shares in open offers pursuant to takeovers or delisting, and to tender equity shares in a buyback.

A QFI is non-resident “person” who resides in a country that is compliant with Financial Action Task Force (FATF) standards and is a signatory to the International Organization of Securities Commissions’ Multilateral Memorandum of Understanding, provided that such person is not registered with SEBI as a foreign institutional investor (FII) or its sub-account.

Chirayu Chandani is an associate at Khaitan & Co. Khaitan & Co is a full-service law firm with offices in Mumbai, Delhi, Bangalore and Kolkata. Views expressed in the article are those of the author and do not necessarily reflect the views of the firm.