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.