Earlier this week, the central government and the RBI overhauled the regime for offshore investments by Indian residents – in a move to encourage offshore expansion and M&A/ PE activity.

Indian companies are now freely permitted to flip their structures and access global capital, effectively allowing Indian founders to realize the best valuations anywhere around the world without the fear of ‘round-tripping’. In addition, Indian corporates with inorganic growth strategies have been given a completely new avenue of acquisition financing – i.e. financing from ‘private credit’ players at the offshore subsidiary level with the Indian entity as the security provider.

The amendments open a slew of deal structures in terms of externalizations and give a renewed flavor to de-SPAC transactions that were often a challenge to structure due to round tripping and swap restrictions, both of which have now been deregulated. 

On the investment funds front, Indian LPs have been allowed to invest in offshore PE/ VC funds directly without regulatory approvals. Equally, Indian GPs can now invest into and pool funds in GIFT City from domestic and international LPs to invest in Indian/ offshore targets without regulatory approvals.

We analyse the equity and debt related provisions of the new overseas investment regime in two separate parts.