Indian Authorities Limit Exit Mechanisms By Shutting Down Put Options Held By Foreign Investors

Twice a year, India's Ministry of Commerce and Industry consolidates and updates the country's foreign direct investment ("FDI") policy framework. Pundits had been expecting the October 2011 update to allow FDI into multi-brand retail and other moves to further deregulate foreign investment into India. The Indian government, however, has surprised the market by moving in the other direction. Not only does multi-brand retail remain off limits to FDI, but the October policy statement has effectively eliminated a common aspect of private equity and venture capital investment in India – the right of foreign investors to force a "redemption" of shares by having the right to put the shares to the issuer or its founder or promoter at a fixed price or internal rate of return ("IRR").