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New mechanism likely to regulate VCs, PEs

— PHOTO: ANU PUSHKARNA

TOWARDS EQUITABLE GROWTH: (from left) K. P. Krishnan, Finance Secretary, D. S. Rawat, General Secretary, Dilip Modi, Vice-President, Assocham, and T. C. Nair, Member, SEBI, at the launch of Venture Capital Association of India (VCAI) in New Delhi on Wednesday.

NEW DELHI: Without disturbing the fund flows of venture capitalists (VCs) and private equities (PEs), the government is likely to regulate them by developing a new mechanism for which Ministry of Finance and market regulator Securities and Exchange Board of India (SEBI) are in constant dialogue process.

Indicating this, K. P. Krishnan, Joint Secretary, Ministry of Finance, who delivered the keynote address at Assocham organised launch of Venture Capital Association of India (VCAI) here on Wednesday, said that by way of regulating VCs and PEs movements, the government would ensure equitable growth of all sectors and restrict specific sectors such as realty from absorbing their investments for making quick money.

The move, according to Mr. Krishnan, will also ensure foreign VCs and PEs under certain tax net as currently domestic VCs and PEs are subjected to certain taxation while their counterparts are exempted from taxation. This would further ensure a level-playing field for domestic PEs and VCs, said the joint Secretary.

In addition, he said the government was going to redefine the definition of VCs, PEs and hedge funds and shortly revisit the issue so that domestic PEs and VCs were not wiped out.

SEBI’s Wholetime Member, T. C. Nair, said the market regulator would make it mandatory to register VCs and PEs with SEBI after the latter had compiled the authentic data about their investments in sectors such as real estate, ITeS and education as at present the market regulator had no definite source about the exact investments of PEs and VCs particularly those that were coming from overseas.

At present, 97 VCs and PEs have got themselves voluntarily registered with SEBI out of 111 VCs and PEs that are operating in the domestic market, said Mr. Nair, making it clear that since India was capital shortage economy, the SEBI would not unnecessarily strangulate them by subjecting them to stringent laws and procedures.

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