The decision to do away with the restriction on pass through benefits for income tax purposes to Venture Capital Funds is a welcome move, says Mr Gopal Srinivasan, Chairman and Managing Director, TVS Capital Funds.
The announcement in the budget has been long awaited as it eliminates the procedural inefficiency.
Earlier, the benefit had been restricted to nine specified sectors. The decision to lift this limitation also enhances transparency for investors and will improve compliance, he said.
Further, the proposal to set up a Rs 5,000-crore “India Opportunities Venture Fund” with SIDBI is a positive boost to the overall Indian Private Equity Fund industry.
Investments from large institutional investors will have to support the creation of a fund of such size.
“This would mean that the regulatory provisions to enable such investments needed for investment by insurance companies, pension funds and charitable endowments could happen over the next few years,” he said.
Key development
Enabling Indian capital pools to become investors or Limited Partners in PE Funds is a key development needed for growth of the Indian fund management industry.
Over Rs 20 lakh crore of capital pools in India belonging to the Insurance, Pension Funds and Charitable Trusts are restricted or prohibited from looking at the PE asset class due to regulatory reasons, Mr Srinivasan said.
These are the primary sources of funds for the PE industry globally, as their time horizons are aligned with the need of Private Equity.
Of the over $60 billion invested so far in the last decade in India by PE Funds, it is estimated that only 10 per cent or less have come from Rupee Funds.
rbalaji@thehindu.co.in