Indian Government Explores New Measures to Attract Foreign Investment Through Mezzanine Instruments
The Indian government is considering steps to ease investment restrictions and provide foreign investors with more flexibility to purchase stakes in local companies, as foreign investment levels have hit a five-year low. According to insiders familiar with the matter, policymakers are examining ways to introduce options for foreign investments using a blend of equity and debt—referred to as mezzanine instruments—which are currently not allowed under India’s foreign investment policies.
If implemented, the new measures would signal another phase of liberalization for India’s financial market, allowing for increased capital flow from global investors. Presently, foreign capital movement in India faces limitations, partly because the Indian rupee is not fully convertible, which restricts various forms of offshore investments.
Mezzanine financing, which combines elements of equity and debt, is a common tool in global markets, offering investors flexible structures that can accommodate different risk profiles. By introducing such instruments, India aims to stimulate foreign direct investment (FDI) flows, enhancing its appeal to strategic international investors seeking diversified financial options. The sources emphasized, however, that discussions are ongoing and no final decisions have been made.
The government’s push for mezzanine instruments aligns with its broader strategy to attract and retain foreign investment, recognizing the importance of stable and increased capital inflows for economic growth. As Indian companies look to expand and grow in an increasingly competitive global landscape, these changes could offer them greater access to foreign funding, potentially fostering a more dynamic investment environment in India.
