The private equity (PE) landscape in India is showing tremendous improvements. In the past five years, the PE investment has grown in the country with more foreign capital eyeing the Indian assets.
Will this trend continue? Will PE investments that account for 2% GDP increase and boost the economy? To deliberate on the present and future of PE investments, PwC in association with CNBC-TV18 in its sixth episode of ‘India Tax Talks’ discussed ‘Private Equity Landscape: Ease of Deal Making’.
Panellists Bhavin Shah, Leader, Financial Services Tax, PwC India; Kalpesh Jain, MD& CFO, Multiples Equity; Nishchal Joshipura, Leader-Private Equity & M&A; and Nishith Desai Associates threw interesting insights on changing trends, ease of doing business in country, tax regulations and more.
“In last 20 years, the private equity investments in India has moved from $200 million opportunity to about $36 billion investments in 2018. There is around $40-50 billion pool of investment available to be invested in next two years’ time in sectors of private equity, real estate, infrastructure and a large part again going to distressed assets as well. I would say in next one year, the investment vintage would be the most interesting one when it is existed,” said Jain.
The positive trends can be seen due to concrete reforms by the government and the regulators in several significant matters such as tax regulations, ease of deal making for PE players in India, withdrawal of capital gains tax exemption under the Mauritius & Singapore tax treaties, changes in the AIF, and more pushed the investments further.
“The three significant changes that have happened in last five years as far as private equity investors are concerned, number one is the IBC which has been a gamechanger for resolving bankruptcies in India, the second big change is on better enforcement of contracts and third interesting change for private equity players has been allowing private equity players to acquire controlling stake in insurance companies,” said Joshipura.
Meanwhile, the move to invite investments in the GIFT city was seen as a welcome move.
“The pace of change in regulations or challenges that are identified to make it work has been really robust. There is high level of interest. A lot is being done for fund managers, tax exemptions, SEBI, RBI regulations are been made so that it is easy to set up fund managers space there,” said Shah, adding “but, there is hardly any incentive for the investors. While the business income is exempt, the capital gains is still taxable in GIFT city. So, therefore, an investor coming from Singapore or Mauritius would pay exactly the same capital gains tax.”
Furthermore, industry stalwarts also shared opinions on deal making timeline and enforcement of contract issues, PE deal closure times in India Vs US, regulator evaluation, trust deficit, right implementation, etc.
Watch the full episode here.
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