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October 29, 2003

SEBI's Venture Capital advisory committee submits report

The Advisory Committee on Venture Capital has submitted its report to India's capital market regulator, SEBI. The committee, under the Chairmanship of Dr. Ashok Lahiri, Chief Economic Advisor, Ministry of Finance, was set up to advise SEBI in matters relating to the development and regulation of the VC industry in the country. The report has been placed on the SEBI website for public comments.

Some of the key recommendations of the report include:

* Removal of the requirement of lock-in of shares post the listing of their investee companies. (At present, the VC funds are subjected to a lock-in for a period of one year after listing.)

* Allowing venture capital funds to invest upto a third of their corpus in listed companies (against 25% of their corpus allowed currently) . The report has however said VC funds will not be given any special exemption from the clauses governing the takeover code.

* Introduction of hybrid instruments (which are optionally convertible into equity) for investing in privately held companies.

* Allowing VC funds to invest in Non-Banking Financial Companies, Real Estate and Gold Financing.

Other recommendations cover formation of Special Purpose Vehicles, allowing domestic VC funds' to invest in foreign VC funds, tax related issues, and foreign exchange related issues.

Click Here to read the full report.