FDI update: Policy changes affecting notes, warranties, LLPs, REITs & more

To enable one of India's largest-ever public offer (IPO) - the listing of the Life Insurance Corporation of India (LIC) - the DPIIT has amended the Consolidated FDI Policy of 2020 via Press Note 1 of 2022 issued on 14 March 2022.

The amendment permits foreign investment in LIC. In light of the opening up of FDI in insurance last year, up to 74%, the amendment provides for capping of FDI in LIC at 20 % under the automatic route.


It also removes the ambiguity surrounding FDI in warrants offered by unlisted companies. Change in the definition of warrants via the circular effectively delinks the SEBI regulations from the Companies Act 2013. A corresponding change in the definition of warrants in the Non-Debt Rules may follow. The amendment opens the door for non-resident investors to consider using warrants for investments in unlisted companies in volatile markets.


Next, the amendment extends the tenure for exercising the conversion option under convertible notes. RBI pricing guidelines kick in for convertible notes only at the time of conversion to equity - particularly beneficial to early-stage startups. An incorrect valuation early on may risk a down-round in the future and trigger anti-dilution clauses in investment documents.

We have similarly compared all the 9 key changes in the FDI policy brought in through the latest circular. And see below for the other changes.



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