Govt Includes Startups In FDI Policy So Indian Startups Can Get 100% Funds From Foreign VC Investors
India’s Commerce Ministry in its consolidated FDI policy document released today has, for the first time included startups, which can raise up to 100 % of funds from Foreign Venture Capital Investor (FVCI), reports TOI today.
In this way, startups in India can now issue equity or equity linked instruments or debt instruments to FVCI against receipt of foreign remittance, said the document which incorporates all the changes made in FDI policy over the past year.
“In addition, startups can issue convertible notes to person resident outside India (subject to certain conditions),” it said.
A person resident outside India (other than citizens/ entities of Pakistan and Bangladesh) will be permitted to purchase convertible notes issued by an Indian startup company for an amount of Rs 25 lakh or more in a single tranche.
NRIs can also acquire convertible notes on non- repatriation basis , said the document of Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce.
“A startup company engaged in a sector where foreign investment requires Government approval may issue convertible notes to a non-resident only with approval of the Government,” it said, adding that the startup issuing convertible notes would be required to furnish reports as prescribed by the RBI.
During the last one year, the government has liberalized FDI policy in over a dozen sectors, including defence, civil aviation, construction and development, private security agencies and news broadcasting.
Foreign investments are considered crucial for India, which needs around USD 1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth.
Foreign investments will help improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.
Earlier in June this year, Government had removed the Angel Tax for investors providing funding to startups, under its ambitious Startup India Action Plan to boost entrepreneurship and job creation in the country.