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

Under the FPI framework, a single FPI (together with its investor group) holds 10.5% of the paid-up equity capital of an Indian listed company on a total-paid-up-capital basis, against a permitted single-FPI investor group limit of below 10%. What is the consequence?

When an FPI investor group crosses the 10% single-company limit, it must either sell the excess within the prescribed period or reclassify that excess as FDI, subject to FDI conditions. It cannot keep it as portfolio investment, and no automatic cancellation or company buyback follows.

  1. AThe FPI must divest the excess holding within the prescribed time or reclassify the excess as FDICorrect
  2. BThe FPI may retain the excess indefinitely as portfolio investment
  3. CThe FPI's registration is automatically cancelled without further option
  4. DThe company must buy back the excess shares at once

Explanation

Where an FPI group's holding exceeds 10% of the company's total paid-up equity capital, the excess must be divested within the prescribed time (five trading days) or may be reclassified as FDI, subject to FDI norms and conditions. It is not retained as portfolio investment, registration is not automatically cancelled, and the company has no buyback obligation.

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