SEBI has come out with guidelines on,' Investment by Qualified Foreign Investors (QFI) in Indian equity shares'. Guidelines have been published after the Government of India allowed QFIs to invest directly into Indian equity market.

Nine page guidelines of SEBI has entrusted responsibility of majority of compliance on depository and depository participants . However, the most worrying part of the guidelines is that it is not specific and does not give proper picture about many scenarios.

As per SEBI guidelines, Qualified Foreign Investors are allowed to do the following transactions and DP shall ensure that QFIs transactions are limited to the following:

6.1.1. Purchase of equity shares in public issues, to be listed on recognised stock exchange(s).
6.1.2. Purchase of listed equity shares through SEBI registered stock brokers, on recognized stock exchanges in India.
6.1.3. Sale of equity shares which are held in their demat account through SEBI registered stock brokers.
6.1.4. Purchase of equity shares against rights issues.
6.1.5. Receipt of bonus shares or receipt of shares on stock split/ consolidation.
6.1.6. Receipt of equity shares due to amalgamation, demerger or such other corporate actions, subject to the investment limits.
6.1.7. Receipt of dividends.
6.1.8. Tender equity shares in open offer in accordance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
6.1.9. Tender equity shares in open offer in accordance with SEBI (Delisting of Equity Shares) Regulations, 2009.
6.1.10. Tender equity shares in case of buy-back by listed companies in accordance with SEBI (Buyback of Securities) Regulations, 1998

The questions that remain unanswered post the SEBI guidelines are as follows:

1) Goodwill Hospital had recently come out with an IPO in which equity shares were offered along with warrants. Can a QFI buy such IPO? Though the guideline is not specific about it, it seems a QFI can buy shares such shares.

2) Is it compulsory to offer shares by a QFI in delisting? If a QFI does not offer shares in delisting of company and retains such shares in his account, can that QFI sell the shares through off market route? Basically what is exit route in this kind of case?

3) Similarly SEBI guidelines are not very clear on rights issue. The guidelines does not state what would happen in cases of rights renunciation. What will happen to the money received from selling of rights by QFIs. With respect to rights issue, the guidelines is not clear various options available to an investor in rights issue.

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