Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members


We seem to be in polarized times. One is either good or bad, something is either black or white. One is either winning or lost. There seems to be no talk about anything in the middle!

Enter the investment world, and all we hear about is either a funding winter or an investor FOMO. Is there anything in between? We have read about several unicorns of late, and the belief is that, it is an end in itself. Can a company not have a good consistent record of growth that is sustainable, and not merely be a quick unicorn?

In a polarized world, however, looking beyond these extreme matrixes, seems implausible to understand which companies are making a real change, are socially conscious, solving a real problem, and are sustainable.

What succeeds in the long term is a well thought out strategy, a well laid out plan. When companies and founders are able to highlight such a path, investor appetite necessarily follows. What also follows is a change in law to support and regulate such investments, as well as to make available an appropriate legal framework.

SEBI’s recent circular of August 17, 2022 is one such instance. The SEBI circular has clarified (albeit with certain conditions) that AIFs/ VCFs can invest in offshore entities, and the requirement that the overseas investee company should have an Indian connection which has been done away with. This stacks up quite well, and allows for more investment opportunities to flow into overseas investee companies that have a bona fide business.

Another instance of regulatory support and oversight keeping pace with time, are the overseas investment regulations and rules notified on August 22, 2022 which have to a large extent clarified the legal position on permissible investments in overseas entities by Indian parties, and permissible structures. The often quoted round tripping concern even for bona fide investments is now well addressed in the revised framework.

The Indian Government has recently withdrawn the Personal Data Protection Bill of 2019. A data privacy legislation has long been expected to be in place. It is hoped that the new law to be introduced will be a more robust and comprehensive one on data privacy, cyber security as well the overall internet ecosystem.

Now, one may be likely to think that all new regulations exist only to support businesses that are ‘in the limelight’. But, no, they do not, and thankfully so. Also it is important to note that law makers are mostly playing a catch up game, to keep up with the newer and dynamic business models. Law and regulations typically take a fair amount of time to formulate – sometimes excessively so – but the intent is always to have in place an ecosystem that stands the test of time, and not just provides a quick fix. The regulation has to achieve a fair balance of allowing businesses to grow, while not letting them negatively impact the gullible.

What would happen if laws were hastily enacted and did not meet the fine balance of support and oversight? It would necessitate several amendments, with no lack of clarity to any stakeholder. Is constant change to law better than having no law at all and no clarity? The answer lies somewhere in between. When investors consider an investment destination, one of the key factors is a stable legal framework. It may therefore be prudent for lawmakers to act in a reasonable time frame, than fast. It demonstrates clarity of thought with foresight.

Even for businesses, it may work well in the long term, if they are sustainable than merely a flash in the pan. Businesses should be built to outlast many others and not be affected by the funding winters or playing to investor FOMO. Such are the businesses that investors always have enough dry powder for.

Author: Raj Ramchandran, Partner at JSA

We hear constantly about how the entire world is inter-connected, the benefits of globalization and we also hear about self-reliance to achieve stability. The current times are quite intriguing – we are seeing socio-economic changes, wars, the effects of a pandemic, and what not. In these times, what is needed most, is the focus on building businesses and formulating laws that support a long term growth. The key here, is substance over form.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members