The lock-in counts per tranche, not from first close.

Foreign capital in an Indian construction-development company is locked in for a period from the date it came in, and the date is each tranche's, not the first's. A fund that capitalises its Indian company in four drawdowns over two years has four lock-in dates, the last of which is two years after the first. A fund that plans its exit from the first tranche's date has planned an exit that the last tranche cannot join, and a partial exit is a different transaction: the shares that may be sold and the shares that may not are the same class, held by the same holder, and the bank that processes the remittance asks which tranche funded which shares. The lock-in is the regime's condition for foreign capital in the sector, and it is applied by the authorised dealer bank at the exit by reading the company's share register against the regime's period for each tranche. The drawdown schedule is a lock-in schedule, and the fund's term, its exit plan and its holders' expectations are read against the last tranche's date rather than the first's.

This note sets out what the lock-in is and what it is for, the tranche as the unit and why, the share register as the evidence, the drawdown schedule as the lock-in schedule, the exceptions and how each is proved, the non-resident holder outside the lock-in, the partial exit and the bank's question, the fund's term against the last tranche, the follow-on capital and its clock, the debt alternative and its own conditions, the lender's reading, a comparison, a worked schedule as a type, cases, what each party holds, the sequence, questions, terms and what to read.

What the lock-in is

The regime permits foreign capital in construction-development on the condition, among others, that the capital stays for a minimum period from its receipt, so that foreign money builds rather than trades. The period is the regime's, counted from the date the capital came in, and it applies to the foreign holder's exit from the company by sale or by repatriation of the capital. The regime names exceptions: completion of the project, or completion of its trunk infrastructure, as the regime defines them, releases the capital early. The lock-in is not a restriction on the company's activity; it is a restriction on the foreign holder's exit, enforced at the exit by the bank.

The tranche as the unit

The lock-in counts from the date each amount of foreign capital came in, because the regime's condition is on the capital and capital arrives in amounts. A fund that subscribes once has one date; one that subscribes in drawdowns has as many dates as drawdowns. The rule is not a convenience the bank adopts; it is the regime's, and the bank applies it by identifying, for each share the foreign holder proposes to sell, the tranche that funded it and that tranche's date. A fund that treats the lock-in as running from the first close has read the regime as counting from an event the regime does not name.

Why the first close is the instinct

A fund's own life is counted from its first close: the investment period, the term, the hurdle, the charge's step-down. A manager that counts everything from the first close counts the lock-in from it too, and the instinct is reinforced by the term sheet, which describes the Indian programme as a single investment with a single exit. The regime counts from the capital's receipt because the regime's concern is the capital, and the capital arrives when the company needs it. The two calendars are reconciled by the structure paper's table, which puts the fund's dates and the tranches' dates on one page, and a manager that has seen the table once counts the lock-in from the right place thereafter.

The bank's reading at each tranche

The authorised dealer bank records each inward remittance against the company, the shares issued against it and the filing that reported it, and its record is the file the same bank, or its successor, reads at exit. A tranche whose remittance arrived before the shares were issued, or whose shares were issued before the remittance was identified, or whose filing was late, is a tranche with an irregularity in the file, and the bank at exit reads the irregularity before it reads the clock. The company's secretary and the fund's administrator reconcile each tranche with the bank's record at the time, so that the file the exit reads is the file the entry built.

The company's cash and the unused tranche

A tranche remitted before the company needs it sits in the company's account as unused foreign capital, and its clock runs from its receipt whether or not it is spent. That is the argument for fewer larger tranches: the clock runs from the date of receipt, and capital received early and spent late has a clock that started early. A company holding unused capital has the regime's and its own rules on the capital's use and on the period within which shares must be issued against it, and the company's treasury is managed to those rules. The trade-off is between a clock that starts early on money that waits and many clocks on money that arrives when needed, and the structure paper chooses per programme.

The share register as the evidence

The company's share register records each share's issue date and consideration, and the company's records tie each issue to the remittance that funded it and the bank's filing that reported it. The register is the bank's evidence at exit: shares issued against the first tranche, on its date, are free when the first clock runs; shares issued against the fourth are free when the fourth's does. A register that issued all the shares at once against a subscription paid in instalments has shares whose tranche the bank must reconstruct from the remittances, and the reconstruction may not favour the fund. The company issues shares per tranche, on the tranche's receipt, reported per tranche, so that the register is the lock-in's index.

The drawdown schedule as the lock-in schedule

The fund draws capital from its holders as the company needs it: land, then consents and design, then construction by phase. Each drawdown remitted to the company is a tranche with a clock. The structure paper carries the drawdown schedule and the lock-in schedule as one table, with each tranche's date, its amount, its shares and its release date, and the fund's exit plan is read against the table's last line. Capital is put in as few tranches as the programme allows, because every tranche is a date, and a programme that needs capital in many small amounts is structured to fund the company in fewer larger ones with the company holding the balance, where the regime and the company's own rules on unused capital permit.

The exceptions and how each is proved

Completion of the project releases the capital when the project is complete as the regime defines completion, which is tied to the authority's completion certificate and the company's records rather than to the fund's view. Completion of trunk infrastructure, the roads, water supply, drainage, street lighting and the rest the regime lists, releases the capital when those are complete as the municipal authority certifies. Each exception is a fact proved by a document the bank accepts, and a fund that relies on an exception obtains the document before it contracts to sell. An exception claimed on the fund's own assessment is an exception the bank tests, and the test is the certificate.

The non-resident holder outside the lock-in

A non-resident Indian or an overseas citizen investing on a non-repatriation basis holds domestic capital under the regime, outside the sectoral conditions including the lock-in, and a fund structured to hold such capital as such has capital with no clock. A company with both kinds of capital, foreign and non-repatriable, has two positions in one register, and the register records which shares are which, because the bank will ask at exit and the non-repatriation holder's exit is domestic while the foreign holder's is tested. The structure names the capital's character at entry, because a character assigned at exit is a character the bank assigns.

The resident partner's shares and the fund's

A resident partner's shares in the company carry no lock-in, because the lock-in is on foreign capital, and a joint venture in which the fund and the resident partner sell together sells shares of two kinds: the partner's, free at any date, and the fund's, free per tranche. The joint venture agreement's drag and tag are drafted to the fund's clocks, so that the partner cannot drag the fund into a sale its clocks do not permit and the fund's tag does not require the partner to wait for the last clock unless the agreement says so. The pricing rule applies to any transfer between the partner and the fund, and a sale by both to a third party is priced by each under its own rules.

The partial exit and the bank's question

A fund that sells some of its shares before the last clock runs sells the shares whose clocks have run, and the bank asks which. The shares are one class held by one holder, and the sale agreement identifies the shares by their register entries and their tranches, so that the bank can read each share's date. The buyer of the free shares buys a minority beside the fund's remaining locked shares, and the buyer's price reflects a holding it cannot complete until the last clock runs; the fund's exit is in two or more transactions, and the joint venture agreement with the buyer governs the interval. A partial exit is a structure, and the drawdown schedule that made it necessary is the structure's cause.

The holder's expectation and the memorandum

The fund's holders read the memorandum for the Indian programme's exit and its timing, and a memorandum that describes a single exit at a date the first clock sets has described an exit the last clock will not permit. The memorandum describes the lock-in per tranche, the drawdown schedule's effect on the exit, the exceptions and their proof, and the partial-exit structure if one is contemplated, so that a holder subscribing to an Indian programme subscribes knowing the last line. The disclosure is the regime's expectation of the memorandum and the holder's protection against an exit described from the wrong date.

The continuation vehicle and the clocks

A continuation sale of the fund's Indian company to a vehicle the manager also manages is a transfer of the fund's shares, tested by the bank against the clocks as any sale is, and a continuation sale timed to the fund's term rather than to the last clock is a sale the bank will process in part. The continuation vehicle's own capital, if foreign, enters the company as new tranches with new clocks, and the rolled holders' shares carry their original dates. The continuation structure for an Indian position is drafted to the table, and the fairness opinion reads the clocks as part of what the vehicle buys.

The fund's term against the last tranche

The fund's term fixes when it must exit, and the last tranche's clock fixes when it may. A fund with a seven-year term that funds its Indian company over three years has a last clock running to the sixth year, and a sale process that must complete within the term after the sixth year is a process of one year. The term and its extensions are read against the lock-in schedule at design, and a fund whose programme needs a long funding period has a term, or an extension right, that covers the last clock and the sale after it.

Follow-on capital and its clock

A follow-on subscription in year four, to fund an overrun or a phase, is a new tranche with a new clock running to year seven, and a fund that has planned its exit for year six has planned it for shares the follow-on's clock holds. Follow-on capital is structured with its clock in view: funded by the company's own cash where it can be, by debt under the external borrowing regime where the conditions allow, or by a tranche whose shares are identified so that the exit sells around them. A follow-on is not a small thing in a lock-in schedule; it is a new last line.

The debt alternative

Foreign debt to the company under the external borrowing regime is not equity and carries no equity lock-in, and it carries its own conditions: the lender's eligibility, the end-use restrictions, the minimum average maturity, the cost ceiling and the reporting. A programme funded partly by equity with clocks and partly by foreign debt with maturities is a programme under two sets of conditions, and the debt's conditions on end-use may not permit what the programme needs. The alternative is read by Indian counsel as its own regime, and the choice between a tranche with a clock and a loan with conditions is made per funding need.

The lender's reading

An Indian construction lender reads the foreign equity's lock-in as the sponsor's commitment: capital that cannot leave for the period is capital that stays through the construction, which the lender likes. It reads the exceptions for the fund's early release, and it reads the drawdown schedule for when the equity arrives relative to its own drawdowns. A lender that requires the equity in before its debt, and the equity's lock-in to run past its repayment, has written the lock-in schedule into its facility.

By event · by clock	What it does	When its clock runs	What the fund does
First tranche at formation	Funds the land	From its receipt	Plans the schedule from it
Later tranches by phase	Fund consents and construction	Each from its own receipt	Keeps them few and identified
Project completion	Releases early	On the certificate	Obtains the certificate before contracting
Trunk infrastructure completion	Releases early	On the municipal certificate	The same
Non-repatriation capital	No clock	None	Records its character at entry
Follow-on subscription	A new clock	From its receipt	Funds otherwise where it can
Foreign debt	No equity clock; its own conditions	By its maturity	Reads the external borrowing regime
Partial exit	Sells free shares	When each clock runs	Identifies the shares and structures the interval

A schedule, as a type

A fund with a seven-year term and a two-year extension right forms an Indian company for a residential township. The structure paper's India page carries the schedule: tranche one at formation for the land, tranche two in month nine for the consents and the design, tranche three in month eighteen for the first phase's construction, with the second phase's construction funded from the first phase's pre-sales through the escrow and from an Indian construction facility. Three clocks, the last running to month fifty-four. Shares are issued per tranche on receipt and reported per tranche, and the register shows each. A Gulf family of Indian origin holds part of the fund's capital on a non-repatriation basis through a vehicle that preserves the character, and its shares in the company are recorded as such. In year four the trunk infrastructure is certified complete by the municipal authority, and the fund obtains the certificate. In year five the fund sells all its shares to a non-resident buyer; the bank reads the register, the tranches, the certificate and the character, and remits. The exit was planned from the last line, and the last line moved forward by the certificate.

The structure paper's table

The structure paper's India page carries the table as its centre: for each tranche, the planned date, the amount, the shares, the filing, the release date, and the exception that could bring it forward; beneath it, the fund's term and extension against the last line, the non-repatriation capital's character, the follow-on policy, and the exit plan with the partial-exit structure if the schedule requires one. The table is written before the first remittance and updated at each, and it is the page the buyer's diligence receives at exit.

The second fund's reading

A manager's second fund with an Indian programme is raised on the first fund's table: whether the tranches were few, whether the register showed them, whether the exit matched the last line, whether a certificate was obtained before a contract. A first fund whose Indian exit remitted on the planned date is a fund whose second raise carries the same table; one whose exit was in parts beside a buyer's minority is a fund whose holders ask for the second's table before the seed. The table is the land door's India discipline in one page.

Four cases, as types

A fund funds its company in six drawdowns over three years and plans its exit from the first. The buyer's diligence reads the register, finds four tranches within their clocks, and the sale completes as to a third of the shares with the remainder in a joint venture the buyer did not want.

A company issues all its shares at formation against a subscription paid over two years. The bank at exit reconstructs the tranches from the remittances, treats each share as funded by the latest remittance it cannot exclude, and the fund's free shares are fewer than its register suggested.

A fund claims the trunk infrastructure exception on its engineer's report. The bank asks for the municipal certificate, which the authority has not issued, and the exit waits a year for a road the authority has not inspected.

A fund structures its drawdowns as few tranches, issues and reports per tranche, records the non-repatriation capital's character, reads the term against the last clock, obtains the certificate before contracting, and exits through a bank that reads a file built for its questions.

What each party holds

The fund holds the drawdown schedule as the lock-in schedule and the exit plan read against its last line.

The company holds the share register per tranche, the bank's filings and the completion certificates.

The authorised dealer bank holds the tests at exit.

Indian counsel holds the regime's period, the exceptions' definitions and the external borrowing alternative.

The non-repatriation holder holds its character, recorded at entry.

The buyer holds its diligence on the register and its price for a partial exit.

Where it surfaces

It surfaces at the term sheet, where the exit is a year. It surfaces at the second drawdown, when the clock is noticed to restart. It surfaces at the register, when the shares were issued at once. It surfaces at the follow-on, when the last line moves. It surfaces at the buyer's diligence, when the tranches are counted. It surfaces at the bank, at the exit. And it surfaces in the fund's own term, when the last clock runs past it.

The cost of getting it wrong

A lock-in planned from the first close costs the fund an exit in parts, a buyer's price for a minority beside locked shares, a joint venture it did not want, and an extension of its term its holders must approve. A register that cannot show the tranches costs a reconstruction the bank makes against the fund. An exception claimed before the certificate costs a year. The cost of the table is a page, and the cost of fewer tranches is the company's treasury managed to the rules.

The committee's reading

The committee reads the lock-in schedule at each quarter with the drawdown schedule, the register per tranche reconciled to the bank's record, the character of each holder's capital, the status of any exception's certificate, and the exit plan against the last line. It reads each follow-on proposal for the new line it adds. And it reads the fund's term and extension right against the schedule annually. A committee with the table reads the Indian exit as arithmetic; one without reads it as a surprise at the buyer's diligence.

A timeline, as a type

At design the India page carries the table: three tranches, the last in month eighteen, releasing in month fifty-four; the fund's term of seven years with a two-year extension right. In month one the first tranche is remitted, the shares issued and reported, and the bank's record reconciled. In month nine the second, and in month eighteen the third, each the same. In year two the non-repatriation holder's vehicle is recorded as such. In year three a cost overrun is funded from the company's pre-sales escrow releases rather than a fourth tranche. In year four the municipal authority certifies the trunk infrastructure and the certificate is obtained. In year five the fund sells its shares whole to a non-resident buyer, the bank reads the file and remits, and the fund's term was never tested.

The sequence

1. The programme's funding needs are listed and the tranches are made as few as the programme allows.
2. Shares are issued per tranche on receipt and reported per tranche; the register records each.
3. The structure paper's table carries each tranche's date, amount, shares and release date, and the fund's term is read against the last.
4. Non-repatriation capital is recorded as such at entry.
5. Follow-on needs are met by the company's cash or by debt under its own regime where the conditions allow, and by a tranche with a new clock where they do not.
6. Exceptions are proved by certificate before any sale is contracted, and the exit identifies the shares by tranche.

Questions a manager asks

Does the lock-in apply to a sale to another non-resident. The regime's condition is on the foreign capital's stay, and a transfer between non-residents within the period is tested against it; counsel reads the current position, and the safe reading is that the clock applies.

Can the company return capital early by reduction. A capital reduction returning foreign capital within the period is a repatriation the lock-in governs; the bank tests it as an exit.

What about dividends. Distributions of profit are not a return of the capital and are outside the lock-in, subject to the company's own rules and tax; the clock is on the capital, not its yield.

How are pre-sales through escrow treated. The buyers' money is the company's revenue under the state regulator's regime, not foreign capital, and it carries no clock; funding later phases from it reduces the tranches.

Is the trunk infrastructure exception reliable. It is the regime's, on the municipal certificate; its timing is the authority's, and a fund does not contract on it before the certificate.

What if a holder in the fund transfers its units. The fund's capital in the company is unchanged and its clocks are unaffected; the lock-in is at the company, not at the fund's register.

Terms used

Lock-in: the regime's minimum stay for foreign capital in a construction-development company, counted per tranche.

Tranche: each receipt of foreign capital by the company, with its own clock.

Trunk infrastructure: the roads, water, drainage and other works whose certified completion releases the capital early.

Non-repatriation basis: the position of a non-resident Indian or overseas citizen whose capital is domestic under the regime and outside the lock-in.

Partial exit: a sale of the shares whose clocks have run, identified by tranche.

Lock-in schedule: the drawdown schedule read as dates of release, the structure paper's table.

What to read

India's foreign investment rules for construction-development on the minimum stay and its exceptions; the company's share register and the bank's filings per tranche; the municipal certification of trunk infrastructure; the external borrowing regime; the non-repatriation provisions. On this site, the India, lexicon and development structures rooms.