RBI reminds Zomato of 2019 regulation on FDI and FPI on day 3 of IPO

RBI asks MNC custodian banks to stick to a 2019 regulation restricting a foreign investor from holding equity as foreign direct investment.

Large multinational company custodian banks were being told by the Reserve Bank of India on the eve of the issue to stick to a 2019 regulation restricting a foreign investor from holding equity as a foreign direct investment along with as foreign portfolio investor in the same company, as many early-stage foreign investors in Zomato were unable to purchase shares in the company’s initial public offering, according to a report released by The Economic Times.

Sought by banks like JP Morgan, Citi, HSBC, and Deutsche, who act as custodians, thereby holding shares on behalf of the Offshore investors, the communication held by the Reserve Bank on India on Tuesday was in a response to clarification for the same.


To subscribe to an initial public offer or purchasing shares of a listed firm in the secondary market, an FPI license from the Securities and Exchange Board of India is required by an Overseas investor who purchases stocks of an unlisted Indian firm stepping in via the FDI route.

Both the routes could be taken by the same entity earlier but largely escaping attention so far the non-debt regulations of October 2019 are now being tested with the Zomato initial public offering which has complicated the matters. To avoid a post-issued dilution of their stakes, most FDI investors in Zomato were keen to participate in the initial public offering, however, the chances of other foreign investors to get a slice of the issue would improve with their absence.