India has been one of the hot destinations for global financial investors, and private equity and venture capital investment has been the most popular route for foreign investments in India. What is of paramount importance for these financial investors is their exit and they have been looking for ways to structure their exit at an assured return around various loopholes and interpretations of the Indian regulations.
The Reserve Bank of India (RBI) and other regulatory authorities, which were not in favour of any guaranteed return linked exit option, have now woken up and understood the need for such exit options. This column focuses on put option as an exit option for foreign investors, the regulatory framework related to this and the option’s future in India.
The relevant legal framework is broadly set out in the Securities Contracts (Regulation) Act and the Foreign Exchange Management Act (FEMA).
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Manish Gupta is a partner and Ashish Ahluwalia is an associate at Link Legal India Law Services.
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