Indian Private Equity and Venture Capital Association (IVCA) has asked for a more enabling framework to boost private equity and venture capital investments in India. Some of the key demands are tax parity for investments in listed and unlisted enterprises and the need to bring certainty on carried interest to avoid friction across regulators.

According to an IVCA EY Report, October 2022 recorded $3.3 billion in PE/VC investments, 75 percent lower than October 2021 and a 60 percent increase over September 2022.

Speaking to CNBC-TV18, Gopal Srinivasan, Chairman at TVS Capital Funds said, “The industry wants domestic capital to grow and wants to continue to welcome overseas capital. With that lens in mind is where all the recommendations have been made number one.”

He added, “The first issue is if short-term liquid investments in the public market are given a lower tax rate and long-term risk capital which is illiquid is given a higher tax rate nearly 50 percent more than the incentives to the family offices and many of the other Indian investors is to say let me wait my decision basis the tax rate as well as also the expected return. We want this to be a pure market-driven decision and have the identical rate of long-term capital gains tax for both the listed market and the unlisted market.”

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The second recommendation is to recognise the Alternative Investment Fund asset class as a very special kind of animal providing more than one lakh plus crore of investments to the country each year.

Srinivasan said, “We believe the 10 trillion vision will actually be a 25 lakh crore asset class as against six lakhs pool now, and providing one lakh now providing five lakhs a year then, for that point of view, some of that tax regulations need to specifically call out our Alternative Investment Fund asset class by name and give it rules.”

Vivek Soni, Private Equity Leader at EY India said, “There are three-four more avenues which the government could look into a - to increase the flow of domestic capital into the alternate asset class. It has been lacking our pension fund industry is just about discovering equity, we need to get them to discover private equity as well. The other part is not just investing into India should be easy, but even exits and taking capital out should also be easy. Now that is aligned to taxation, it is aligned to predictability and clarity on capital gains structures.”

Soni added, “The other thing which maybe the government could think of is look into the framework for domiciling of foreign companies into India. There could be companies that have gone overseas, but now are revaluating coming back into India or for that matter if the strength of the Indian economy continues to grow as an outlier to the rest of the developed world maybe other foreign companies could also think about coming into India. Right now there is no framework for domiciling them in India. Why don't we think on that part it will just increase the investment flows.”

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