Snapshot

India received $147 bn in private capital investments between 2014-2019; with inflows of $48 bn in 2019 in comparison to $888 bn institutional investment globally.

India focused funds have been able to generate higher returns at 14.4% when compared to other markets in Asia. Over the last five years, key sectors such as infrastructure, eCommerce and financial services have attracted the highest investment from institutional investors.

  • $239 Bn
    Portfolio investment since 2000
  • 1,037
    Deals in 2019
  • 50,000+
    Startups in India
  • 660+
    Active funds in India

Industry Scenario

PE deal value has continued to increase, while deal count has plateaued since 2015.

The deal value has doubled from $17.6 Bn spread over an approximately a similar number of deals depicting growing maturity in the deal ecosystem.

Over the last few years, some of the top deals were anchored by government funds because of the patient capital opportunities in the market with a favourable return. With sovereign and pension funds like GIC, Abu Dhabi Investment Authority (ADIA) and Canada Pension Plan Investment Board (CPPIB) allocating billions of dollars towards India investments, funds are certainly expected to rise in 2020; with Brookfield becoming the largest private investor in India in 2019.

Growth Drivers

  • Infrastructure investment of $1.4 Trillion between 2019 and 2025

    21% of this investment through the private sector; 100% tax exemption for investment by sovereign wealth funds and pension funds
  • New investment models for greater private participation

    REITs and InvITs launched in India; Strategic disinvestment target of $27.6 Bn in FY21
  • 3rd largest startup ecosystem globally

    Domestic ecosystem valued at over $90 Bn; 31 Indian unicorns and growing
  • Ease of regulatory environment

    Institutional investment limit brought at par with to FDI investment threshold
  • Open

    The Insolvency and Bankruptcy Code (Amendment) Act, 2020

    Parliament passes amendments to the India Insolvency and Ban…

  • Open

    Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020

    Amendments to IBC Code due to ongoing COVID-9 Pandemic

  • Open

    Operational framework for transactions in defaulted debt…

    The operational framework for transactions in defaulted debt…

  • Open

    Securities and Exchange Board of India (Substantial…

    Amendment to the Securities and Exchange Board of India (Sub…

  • Open

    Securities and Exchange Board of India (Issue of Capital…

    Amendments to the Securities and Exchange Board of India (Is…

  • Open

    Conducting meeting of unit-holders of InvITs and REITs…

    InvITs/ REITs may conduct meeting of unitholders through  VC…

  • Open

    The Insolvency and Bankruptcy Code, 2016 (Amended)

    An Act to consolidate and amend the laws relating to reorgan…

  • Open

    SEBI Real Estate Investment Trusts (REITs) Regulations, 2014

    Framework, rules and regulation of the REITs 

  • Open

    SEBI Infrastructure Investment Trusts (InvITs) Regulation,…

    Framework, rules and regulations of InvITs

  • Open

    SEBI Alternative Investment Funds Regulations, 2012

    Guidelines for the setting up and operation of Alternative I…

  • Open

    RBI master circular on foreign investment in India

    Rules and regulations implemented under FEMA to promote inve…

  • Open

    Monetization of Operational National Highways

    National Highways Authority of India (NHAI) is monetizing pu…

Industry Highlights

  • 12

    Highways bundles

  • 100%

    Tax exemption 

  • 14.4% 

    Average IRR (India)

  • 12 lots of highway bundles of over 6,000 km to be monetized by 2024
  • Sovereign Wealth Funds to get 100% tax exemption on their interest, dividend, and capital gain incomes for investments made before 2024 in infrastructure and other notified sectors
  • Part of LIC to be privatized through an IPO
  • Established funds in Asia and India averaged an IRR of 11.9% and 14.4% respectively. This provides a good benchmark for investors
  • Disinvestment of BPCL and Concor – setting the ground for strategic sale programme
  • Modes of Investment- FDI, FVCI, FPI, REITs, INvits, AIFs

Major Investors

Financial Investors Initiative Team

Financial Investors Initiative is a team set up with the objective of facilitating the greater allocation of capital to India by Limited Partners and increased deployment by General Partners. The team works with investors to identify investment opportunities, undertake policy advocacy, and facilitate the resolution of issues at different stages of investment.

Key initiatives taken by FII team for promoting Institutional investment

  • Identification of investment avenues aligning with investors’ interests
  • Desktop research for building India investment strategy
  • Strategic investment advisory and financial modelling
  • Support for obtaining requisite permissions and clearances
  • Aftercare through issue resolution with support from regulatory bodies

FAQs

Frequently
Asked Questions

  • What is a ‘Foreign Institutional Investor’?

    An entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the Securities and Exchange Board of India (SEBI) (Foreign Institutional Investor) Regulations 1995.

    For more information, click here.

  • What are the limits of FII/FPIs Investment in securities in India?

    Foreign Institutional Investor (FII) and Foreign Portfolio Investors (FPI) may in terms of Schedule 2 and 2A of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, as the case may be, respectively, invest in the capital of an Indian company under the Portfolio Investment Scheme which limits the individual holding of an FII/FPI below 10% of the capital of the company and the aggregate limit for FII/FPI investment to 24% of the capital of the company.

    This aggregate limit of 24% can be increased to the sectoral cap/statutory ceiling, as applicable, by the Indian company concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body and subject to prior intimation to RBI. The aggregate FII/FPI investment, individually or in conjunction with other kinds of foreign investment, will not exceed sectoral/statutory cap.

  • Who is a Foreign Venture Capital Investor (FVCI)?

    FVCI refers to an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI (FVCI) Regulations} and proposes to make investments in accordance with FDI Regulations.

    For more information, click here.

  • What are investment vehicles?

    Investment Vehicle is an entity registered and regulated under relevant regulations framed by SEBI or any other authority designated for the purpose. For the purpose of Schedule 8 of FEMA 20(R), an Investment Vehicle is a Real Estate Investment Trust (REIT) governed by the SEBI (REITs) Regulations, 2014, an Infrastructure Investment Trust (InvIt) governed by the SEBI (InvIts) Regulations, 2014 and an Alternative Investment Fund (AIF) governed by the SEBI (AIFs) Regulations, 2012. It does not include a Venture Capital Fund registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996.

    For more information, click here.

  • What is an Angel Investor?

    "Angel investor" means any person who proposes to invest in an angel fund and satisfies one of the following conditions, namely,

    •  Net tangible assets of at least INR 2 cr excluding value of his principal residence, and who:
      • has early stage investment experience, or
      • has experience as a serial entrepreneur, or
      • is a senior management professional with at least ten years of experience
    • A body corporate with a net worth of at least INR 10 cr, or
    • An AIF/ VCF registered under these regulations.

    For more information, click here.

  • What is the meaning of Angel Fund?

    "Angel fund” is a subcategory of Venture Capital Fund under Category I Alternative Investment Fund that raises funds from angel investors and invests in accordance with the provisions of AIF Regulations.

  • What is Fund of Funds?

    Fund of Funds, in general parlance as gathered from publicly available sources is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. In the context of AIFs, a Fund of Fund is an AIF which invest in another AIF.

    Please refer to link for more information.

  • What is 'debt fund'?

    Debt fund is an Alternative Investment Fund (AIF) which invests primarily in debt or debt securities of listed or unlisted investee companies according to the stated objectives of the Fund. These funds are registered under Category II. In this regard, it is clarified that, since Alternative Investment Fund is a privately pooled investment vehicle, the amount contributed by the investors shall not be utilised for purpose of giving loans.

    Please refer to section 2(1)(i) of SEBI (Alternative Investment Funds) Regulations, 2012 at link for more information.

  • In which legal forms can an AIF be set up?

    An AIF under the SEBI (Alternative Investment Funds) Regulations, 2012 can be established or incorporated in the form of a trust or a company or a limited liability partnership or a body corporate. Most of the AIFs registered with SEBI are in trust form.

    Please refer to section 2(1)(b) of SEBI (Alternative Investment Funds) Regulations, 2012 at link for more information.

  • What is the limit specified under AIF regulations for number of investors?

    No scheme of an AIF (other than angel fund) shall have more than 1000 investors. (Please note that the provisions of the Companies Act, 1956 shall apply to the AIF if it is formed as a company). In case of an angel fund, no scheme shall have more than two hundred angel investors. However, an AIF cannot make invitation to the public at large to subscribe its units and can raise funds from the sophisticated investors only through private placement.

    Please refer to section 4(b), 10(f) and 19E(4) of SEBI (Alternative Investment Funds) Regulations, 2012 at the link for more information

  • Can Venture Capital Funds registered under the repealed SEBI (Venture Capital Funds) Regulations, 1996 seek re-registration under SEBI (AIF) Regulations?

    Venture Capital Funds (VCFs) registered under the repealed SEBI (Venture Capital Funds) Regulations, 1996 ("VCF Regulations") may seek reregistration under SEBI (Alternative Investment Funds) Regulations, 2012 subject to approval of two-third of their investors by value of their investment. As against other applications for registration as Category I- VCFs who have to pay INR 5 lakhs as registration fees, VCFs registered under the VCF Regulations are required to pay INR 1 lakh only as re-registration fees.

    Please refer to section 3(2) and second schedule of SEBI (Alternative Investment Funds) Regulations, 2012 at link for more information.

  • What are Category I AIFs?

    AIFs which invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable and shall include venture capital funds, SME Funds, social venture funds, infrastructure funds and such other Alternative Investment Funds as may be specified.

    Please refer to section 3(4)(a) of SEBI (Alternative Investment Funds) Regulations, 2012 at link for more information.

  • What are Category II AIFs?

    AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012. Various types of funds such as real estate funds, private equity funds (PE funds), funds for distressed assets, etc. are registered as Category II AIFs.

    Please refer to section 3(4)(b) of SEBI (Alternative Investment Funds) Regulations, 2012 at link for more information.

  • What are Category III AIFs?

    AIFs which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs.

    Please refer to section 3(4)(c) of SEBI (Alternative Investment Funds) Regulations, 2012 at link for more information.

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