MUMBAI: International Financial Services Centre(IFSC), Gift City could emerge as the hotspot for private equity funds and venture capitalists replacing destinations such as Singapore and Mauritius as market regulator the Securities and Exchange Board of India (Sebi) has allowed alternative investment funds(AIFs) to operate from Gift City.
The move assumes significance as the central government has been making efforts to bring fund management industry on-shore. However, these efforts have borne little fruit thanks to substantially higher expenses for setting up of the funds and also higher tax incidence.
With the new platform in IFSC coming up for AIFs, private equity investors will be able to launch their funds through the platform at marginal costs, say experts.
AIFs are pooled funds that cater to wealthy investors with a minimum ticket size of over Rs one crore.
The central government has been putting several efforts to bring traction in the IFSC as bulk of the Indian fund management industry both in the listed and unlisted space is located off-shore. The central government has already exempted the platform from applicability of several taxes including capital gains and stamp duty.
Several PE funds have been looking for opportunities to move their fund management to India in the last two years in advent of several new tax avoidance laws. Several off-shore structures could be deemed impermissible under new general anti-avoidance rules(GAAR). Coming from Gift provides stability from this point of view.
AIFs have been gaining traction over the last few years thanks to surge in the demand for sophisticated products. The assets managed by AiFs have surged three fold in last four years and are expected to continue on this high growth path.