Private Equity And Venture Capital: An Overview Of Investments In India

Aryan Shivappa, School of Law, CHRIST (Deemed to Be) University

ABSTRACT

The decade after 2000’s witnessed spiralling growth and investment in the private equity or venture capital sector in India.1 The growth figures have surpassed everyone’s expectations and account for over 20% year-on-year growth compounded annually.2 It can be attributed to the growing middle- class population in the country and the recent spur in urbanisation or the shift to cities from villages and towns. During the recent economic crisis, India has shown strength as a so-called ‘emerging market.' During the most of the last quarter-century, India's relatively dynamic economy has offered a favourable investment climate for PE investments. They have been bullish on India in the Indian market, and they still are (2015 saw a record inflow of an estimated USD 16.8 billion from PE funds).3Researchers also concluded that PE-funded firms outperform comparable Indian companies in terms.4 While it has had its ups and downs, the most interesting part of PE funds' efforts in India has been adapting to the Indian regulatory and legal system. “While the conventional PE model has been popular in developed economies, PE companies soon realised that transplanting this model to India would be difficult due to various legal constraints,” as one analyst puts it.5 As a result, Indian private equity companies have created an alternative model...that has been tailored to India's dynamic regulatory and governance environment.” The limitations in India's regulatory system for PE funds are reflected in this adaptation and reworking of the conventional PE model. On the regulatory front, the overriding trend has been that of liberalisation and rationalisation over the last decade and a half, albeit not without setbacks. Investor sentiment in both public and private capital markets has been impacted significantly by changes in the regulatory system, especially in taxation laws.

Keywords: Private Equity, Investments, Taxation, Venture Capital, Anti- Corruption Law.