The Securities and Exchange Board of India (Sebi) today paved the way for angel funds to invest more in start-ups besides allowing foreign portfolio investors (FPIs) to invest in unlisted debt securities.

The market regulator has also barred private equity funds and promoters of listed firms from entering into side deals for profit sharing without relevant disclosure.

Sebi allowed angel funds to invest in start-ups that are up to five years old against three years at present. It also slashed the lock-in requirement for an investment in an entity to one year from three years. The upper limit for the number of angel investors in a scheme will be increased to 200 from 49. Sebi also allowed angel funds to invest up to 25 per cent of their investible corpus in overseas entities.

Angel fund, a sub-category of alternative investment fund, encourages entrepreneurship by financing small start-ups that find it difficult to obtain capital from traditional sources.

In another measure, the regulator has decided to permit FPIs to invest in unlisted corporate debt securities and securitised debt instruments with a ceiling of Rs 35,000 crore, within the current investment limit prescribed for corporate bonds.

FPIs will be allowed to invest in non-convertible debentures (NCDs) or bonds issued by a domestic public or private company.

Under the current norms, FPI investment in unlisted debt securities is permitted only in infrastructure companies, while investment in securitised debt instruments is not allowed. Sebi said investment in securitised debt instruments would not be subject to the minimum three-year residual maturity requirement.

The market regulator also clamped down on secret profit-sharing agreements between PE funds and promoters or the senior management of listed companies. It has restrained them from entering into any such pact without prior approval of the board and public shareholders. The restrictions will also apply to employees, including key managerial personnel and directors, for themselves and on behalf of any other person. #casansaar (PTI)