DIPP AMENDS FOREIGN INVESTMENT POLICY TO ALLOW SMOOTH PE EXITS

 After a month of negotiating with the government, stakeholders have convinced the Department of Industrial Policy and Promotion (DIPP) to modify its stringent anti-exit provisions applicable to foreign investments in India.  According to a new paragraph (no. 3.3.2.1) that the DIPP had added in the FDI policy on September 30, only equity shares, fully, compulsorily and mandatorily convertible debentures and preference shares, with no in-built options of any type, would qualify as eligible instruments for FDI.  This would have been a great impediment to private equity investors looking to invest in India since put and call options are the most common route for any private equity investor to exit from its investee companies.  Bringing relief to the country’s private equity investors, the government has amended the foreign direct investment policy by removing this new amendment.