On Wednesday, the capital market regulator, SEBI (Securities and Exchange Board of India) has liberalised rules for the so-called angle funds in an attempt to expand early-stage investments in start-ups. The new norms comprise several significant changes over the current structure in order to expand the chances of having categories of investors so that funds can be raised to early stage entities. The move comes soon after the Alternative Investment Policy Advisory Committee (AIPAC) headed by chairmanship of N R Narayana Murthy submitted its report to Sebi along with various recommendations including specific ones relating to angel funds.
For starters, the total number of informal investors allowed to fund in a startup which were used to be only 49 under the last norms, has now been raised all the way up to 200. Moreover, the Securities and Exchange Board of India has also lessened down the minimum investment amount in any startup by an angel investor to INR 25 Lakh. This is exactly half of the amount used to be the minimum ticket under earlier rules. Read Funding News.
Further, the new guideline from the SEBI has also highlighted that minimum period of investment made by an angel investor in the venture capital undertaking should be locked-in for one year against the previous limit of three years. Besides, such investments have also been allowed to invest up to 25 percent of their investible corpus in overseas venture capital undertakings, SEBI conveyed in a statement.
“This will greatly benefit start-ups looking for raising venture funding not just for the money but for the other value addition that raising money from a venture capital firm brings such as direction and mentorship from seasoned investors,” added, Nishit Dhruva, Managing Partner, MDP & Partners, a law firm.
The regulator has also decided to allow Foreign Portfolio Investors (FPIs) or FIIs (Foreign Institutional Investment) to fund in unlisted corporate debt securities and securitised debt instruments with a ceiling of Rs 35,000 crore. “Investment by FPIs in the unlisted corporate debt securities and securitised debt instruments shall not exceed Rs 35,000 crore within the extant investment limits prescribed for corporate bond from time to time which currently is Rs 2,44,323 crore.” Earlier, FIIs were not allowed to make an investment in such securities if it wasn’t issued by an infrastructure sector company.
It goes without saying that the new norms lighten up by the regulatory watchdog are investor friendly and will ease accessibility for early-stage investment in start-ups. Read Startup News.