Panel to suggest ways to boost PE investments

The government has set up a panel to recommend measures to boost venture capital (VC)and private equity (PE) investments. Among the primary concerns that the government hopes to address is that of the tax policies applicable to such investments. PE players have been asking for lower tax rates. The six-member committee will be headed by M Damodaran, former chairman of the Securities and Exchange Board of India (SEBI).

A finance ministry circular noted the committee would study how regulations and tax policies can facilitate investments. The panel will also “review issues, compliances and suggest simplifications and changes” for further accelerating the growth of alternative capital to participate in the VC/PE industry, it added.

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In the Budget for 2022-23, finance minister Nirmala Sitharaman had said the government planned to set up a working group to suggest ways to boost PE/VC investments.

The Damodaran-led committee, as per the circular, has also been asked to suggest measures to “further accelerate investments into start-ups and sunrise sectors”, and to suggest “forward looking measures and future ready regulatory practices”, in addition to studying and emulating global best practices, the circular stated.

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A study released by IVCA and consultancy firm EY on Tuesday noted PE/VC investments had dropped to a 19-month low of $2.2 billion in August, compared with $4.1 billion in July and $11.2 billion in August 2021.

In 2021, companies had cumulatively raised $77 billion of venture capital and private equity, more than 60% compared to 2020.