By the end of this week, foreign controlled AMCs are likely to be untagged from the October 17 circular that defines them as overseas investors, a person familiar with the matter said.
A senior MF official requesting anonymity said, “After assessing the implications of this circular, foreign controlled AMCs approached SEBI in the first week of November and the market regulator then discussed the matter with the government. SEBI has assured that by the end of this week, the circular would be revised and foreign controlled AMCs will not be treated as overseas investors.”
He further said that this is a peculiar situation since Indian AMCs with more than 50% foreign shareholding are pooling money from domestic investors. So far, such foreign controlled AMCs have enjoyed no restrictions on investment in any listed company in India. However, under the new guidelines foreign controlled AMCs would be at a great disadvantage as compared to their domestic peers.
Under the new Foreign Exchange Management Act (FEMA) guidelines released on October 17, foreign controlled AMCs are considered overseas investors. This means that if an Indian company is allowed a certain percentage of foreign shareholding under FDI rules, foreign controlled fund houses’ investment will be considered as part of the foreign investor shareholding.
HDFC, ICICI Prudential, Nippon India, Franklin Templeton, Mirae Asset, Invesco and BNP Paribas are among the fund houses that would be affected the most by this circular.
