Govt considering regulation of Venture Capital, PE funds

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New Delhi, Aug 6 (UNI) A new mechanism to regulate Venture Capital and Private Equity funds to ensure orderly development of various sectors is under the consideration of the government, a top official said here today.

The move, which is not intended to disturb the flow of funds from VCs and PEs, will also ensure a level playing among domestic and foreign players.

Addressing an ASSOCHAM event here, Mr K P Krishnan, Joint Secretary in the Finance Ministry, said his Ministry and SEBI, the market regulator, are engaged in a dialogue on the subject.

Mr Krishnan was delivering the keynote address at the kaunch of Venture Capital Association of India (VCAI).

Mr Krishnan said the government would restrict the flow of funds to specific sectors like realtestate if it is in the nature of hot money.

The aim is also to provide a level playing field among domestic and foreign VCs and PEs. At present domestic VCs and PEs are subjected to certain taxation measures, while their foreign counterparts are exempted from it.

Besides, the government plans to redefine VCs, PEs and hedge funds.

"The issue meeds to be revisted to ensure that domestic PEs and VCs are not adversely impacted," Mr Krishnan said.

Dr T C Nair, SEBI's Wholetime Member, said the market regulator will make it mandatory to register VCs and PEs with it. This will be done after SEBI has compiled "authentic data" about their investments in sectors like real estate, ITeS and education.

Mr Nair said the market regulator at present has no definite source about the exact nature of investments of PEs and VCs, particularly those that are emnating from overseas.

Currently, 97 VCs and PEs have undertaken voluntarily registerion with SEBI out of the 111 VCs and PEs that are operational in the domestic market, Mr. Nair said.

He, however, clarified that the government does not intend to strangulate the flow of funds as the country needs monies for its development.

Mr Krishnan said it would take sometime for the Finance Ministry and the SEBI to evolve a new mechanism so that the regulation is fair.

The government would also consider offering tax incentives to those PEs and VCs that intend to invest in high risk areas, Mr Krishnan added.


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