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NISM Certifications · NISM-Series-VI: Depository Operations · Foreign Portfolio Investors (FPI)

An FPI's investment in a company's equity breaches the single-FPI limit of 10% of the total paid-up equity capital of the company. What is the consequence under the FPI framework?

The FPI must sell the excess holding within five trading days of the breach. If it does not, the whole holding is treated as foreign direct investment and must comply with FDI rules. There is no automatic cancellation or three-year ban.

  1. AThe FPI is automatically delisted from the depository
  2. BOnly the excess holding is cancelled by the company without compensation
  3. CThe FPI is barred from investing for 3 years
  4. DThe FPI must divest the excess holding within five trading days or it is treated as FDICorrect

Explanation

If a single FPI (with its investor group) goes above 10%, it has five trading days to divest the excess; otherwise the entire investment is reclassified as FDI subject to FDI norms. There is no automatic delisting, cancellation or fixed bar.

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