Major Curbs on Foreign Investment in Corporate Debt: Analysing the Road Ahead

Thursday, May 10, 2018

SESSION: 4:00 PM - 5:00 PM (IST)

INTRODUCTION

In a move that is likely to dissuade foreign investments in listed and unlisted corporate debt, the Reserve Bank of India (“RBI”) has introduced substantial investment and diversification restrictions vide its circular dated April 27, 2018 (“Circular”), that can be accessed here.

Whilst FPIs can now invest in corporate bonds with a minimum residual maturity of 1 year (as opposed to the erstwhile maturity period of 3 years), the Circular restricts the ability of FPIs to invest in corporate bonds in light of the following:

  • introduction of new concentration limits wherein FPI cannot invest more than 10% of the prevailing investment limits; and
  • diversification limits wherein: i) investments by FPI cannot exceed 50% of the corporate bond issue; and ii) investment by FPI cannot exceed 20% of its corporate bond portfolio in respect of a single corporate (including entities “related to the corporate”).

These changes, on a consolidated basis, are likely to result in a change in the investment strategy for foreign investors that are considering investments in corporate debt. It is likely that alternatives such as investment through setting up of Non Banking Financial Company, Alternative Investment Fund, FVCI route or the more restrictive ECB regime maybe considered by such investors.

We cordially invite you to be a part of our webinar on May 10, 2018 to join our discussions on the Focus Area set out below. We also request you to to email us at webinarmay10@nishithdesai.com with your questions, which we will address during the session.

Focus Area

  • Understanding the “concentration limits” applicable to FPIs for corporate debt investment;
  • Understanding the “diversification limits” set out in the Circular;
  • Implications of the changes introduced by the Circular on investments by FPIs;
  • Alternative modes of investment (such as NBFCs, AIFs, FVCI route) along with its merits / de-merits;
  • Tax implications;
  • Road ahead.

Flow of the session

4:00 PM – 4:30 PM (IST):

Panel Discussion

4:30 PM – 5:00 PM (IST):

Q & A

Speakers

RUCHIR SINHA

Leader - Private Equity and M&A

Nishith Desai Associates

Ruchir Sinha co-heads Private Equity and M&A Practice and heads the Real Estate and Structured Finance Practice at the firm. Ruchir has also been involved in several high profile PE / M&A transactions and has also extensively advised on setting up of several leading offshore funds and captive investment platforms. Apart from transactional advisory, he also focuses on cross border tax and regulatory advisory and developing pioneering structures.

He was nominated amongst the top 3 lawyers in India (under 35 category) at IDEX Legal Awards. Several of his transactions in structured finance and private equity have been nominated as Most Innovative by Financial Times, London in 2015 and 2016. He is also the recipient of the Scholarship of the International Bar Association for his paper on structured finance at the IBA Conference in Vancouver. Actively contributes to policy development for private equity and structured finance through international industry bodies, and was most recently involved in the drafting of the SEBI REITs Regulations.

SIMONE REIS

Leader, Private Equity & Mergers & Acquisitions

Nishith Desai Associates

Simone is the Co-Head of Mergers & Acquisitions practice and Corporate Governance practice at the firm. Simone’s practice focuses on mergers and acquisitions, private equity and venture capital investments, domestic and international, and has advised a wide spectrum of clients, across several sectors. She has represented clients on complex acquisitions and investments, debt and mezzanine funding and financing arrangements. She advises clients on overseas investment, competition law matters, foreign investment, PIPE deals, and capital market related issues. Simone has also advised many listed companies and board on issues of corporate governance.

Mustafa Sanchawalla

Vice President & Head, Securities & Fiduciary Services,

DBS Bank, India

Mustafa heads the custody & escrow services for DBS India. He oversees relationship management to institutional investors and has been with the bank for over 6 years. He has more than 15 years of experience in banking and finance across institutions like DBS, HSBC and IL&FS.