Private Equity, Venture Capital Funds could be treated a separate class of investors

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Private Equity, Venture Capital Funds could be treated a separate class of investors

  • Expert committee to be setup in 1-2 months to look at regulation and processes.
  • The government is considering recognising private equity (PE) and venture capital (VC) funds as a separate class of investors so that multiple issues faced by these increasingly significant investors and their concerns can be resolved in a comprehensive manner.
  • Several PE and VC funds have pointed out issues relating to taxation, regulation and processes leading to litigations at various tribunals.

Budget 2022-23

  • Venture capital and private equity invested more than Rs. 5.5 lakh crore last year, facilitating one of the largest startup and growth ecosystems.
  • Scaling up this investment requires a holistic examination of regulatory and other frictions. An expert committee will be set up to examine and suggest appropriate measures.
  • Committee is expected to deliberate over all the issues and see if PE and VC funds could be classified as a separate class of investors like foreign portfolio investors (FPIs). FPIs are regulated by the Securities and Exchange Board of India and invest in the listed space.

Private Equity

  • Private equity can be defined as capital investment in private companies that are not listed on a stock exchange by companies or investors.
  • These funds are invested in by high-net-worth companies or individuals.
  • These investors buy private company shares or gain the ability to take public companies private and de-list them from public stock exchanges.
  • Private equity firms buy existing businesses and help them grow and thrive.

Venture Capital

  • Individuals or investors invest funds in start-ups or small businesses with the goal of launching a new concept and launching a new entrepreneur.
  • All new private enterprises that are unable to secure money from the public sector can turn to venture capital.
  • This sort of investment has a significant level of risk, but it is backed by new and highly qualified entrepreneurs.
  • Venture capital firms help start-up businesses get off the ground before they go public.
  • It's a common funding method that's occasionally required to raise funds for bank loans, capital markets, or other debt instruments.
  • A Venture Capitalist is this type of investor, and the capital they supply is termed equity capital.