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Private equity funding in Indian infrastructure firms

The inflow of private equity fund in the country will become hassle-free with market watchdog SEBI clarifying that it would not regulate fund raising by private equity players from overseas markets, officials of foreign fund houses said.
The decision will help infrastructure firms as bulk of the private equity funds is directed at this segment. "If fund raising (by PEs) from overseas is regulated, then that will handicap infra funding of the country. We need foreign capital to bridge the gap between the huge demand- supply gap, which cannot be mobilised from domestic sources alone," a top official of a foreign fund said.

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Recently, the market regulator clarified that its proposed regulatory framework concerning alternative investment funds (PEs and VCs) will not cover those raising money from investors abroad. SEBI which is likely to come up with regulations related to PEs and VCs in the next two months, however, will regulate firms that will raise money from the domestic market. Another official of a foreign fund house also said no additional regulations are required as most of these investments come under the ambit of FDI rules.
"This is a positive development as foreign investment is anyway regulated by FDI rules and there is no need for further regulations," said Fire Capital chief executive, Om Chaudhury. These officials also say it is difficult to stick to distinct segments like infra, real estate for a fund house which is sector-agnostic and seek opportunities across sectors.
Recently, the market regulator had also said the new regulations would not have any mandates for funds to stick to a particular sector, unless the fund house enjoyed certain policy concessions. On this, an official of Birthstone Capital Advisors said long-term investment flow would be facilitated by the decision. "Long-term investment flow will be facilitated from foreign fund houses into the country," Birthstone Capital Advisors senior associate Arpit Lodha said.

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