Snapshot

PE-VC investments in India reached ~$70 bn in 2021 with a record velocity of over 2,000 deals closed compared to almost 1,100 each in the two years prior, in a resounding bounce back from Covid-driven restraint.

Already in 2022, more than $24 bn of PE-VC investments in ~630 deals were recorded by May. The average realised cheque size of $168 mn this year keeps PE deals within the range of $150–$200 mn seen over last five years.

  • $ 307 Bn

    Private-equity investment from 2012-2021
  • 2067

    Deals in 2021
  • 75 k+

    DPIIT Recognised Startups in India
  • 8.7%

    Real GDP growth (2021-22)

Industry Scenario

Much of 2021’s deal activity was in consumer tech and IT/ITES, an indication of the expanding share of growth captured by the tech and internet sectors.

The two sectors combined represented more than 60% of the year’s deal value at nearly $44 bn. Major LPs are getting more active and co-investing with GPs on large assets. 2021 saw 2x activity from LPs compared to their average deal activity across 2018–2020.

In the most celebrated milestone for 2021, exits worth more than $36 bn unlocked. Strategic sales constituted 50% of the exit volumes, while the share of value was almost equally split across secondary sales, public market exits, and strategic sales

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

    Clarification on the valuation of bonds issued under Basel…

    Revisions to the residual maturity of bonds for the purpose…

  • Open

    Circular on Mutual Funds

    Circulars issued by SEBI for the various amendments for Mutu…

  • Open

    Master Circular for Depositories

    A compilation of the relevant circulars/communications perta…

  • Open

    Insolvency and Bankruptcy Board of India (Model Bye- Laws…

    Amendment to the Insolvency and Bankruptcy Board of India (M…

  • Open

    Circular on Amendment to Regulation 20(6) of SEBI (AIF)…

    Waiver in respect of compliance with clause (i) and (ii) of…

  • Open

    Master Circular on (i) Scheme of Arrangement by Listed…

    This Master Circular is a compilation of relevant and update…

  • Open

    Introduction of Unified Payments Interface (UPI) mechanism…

    The process flow for applying through the online interface o…

  • Open

    Introduction of “Flexi Cap Fund” as a new category under…

    In order to give more flexibility to the mutual funds and ta…

  • Open

    Circular on Enhancement of Overseas Investment limits for…

    Mutual Funds can make overseas investments subject to a maxi…

  • Open

    Guidelines for rights issue of units by an unlisted…

    In order to enable unlisted InvITs to raise further f…

  • Open

    Framework for monitoring of foreign holding in Depository…

    Operational Guidelines for Indian Depositories which were re…

  • Open

    Procedural Guidelines for Proxy Advisors

    Procedural Guidelines for Proxy Advisors alongside the Code…

  • Open

    Manner and mechanism of providing exit option to dissenting…

    This details the guidelines in respect of conditions,  manne…

  • Open

    Manner and mechanism of providing exit option to dissenting…

    This details the guidelines in respect of conditions, manner…

  • Open

    Guidelines for Issue and Listing of Structured Products/…

    Amendments to notify valuation of MLDs shall be carried  out…

  • Open

    Master Circular on Mutual Funds

    In order to enable the industry and other users to have acce…

  • 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…

  • Open

    Insolvency and Bankruptcy (Application to Adjudicating…

    Amendment to the Insolvency and Bankruptcy (Application to A…

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.

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  • 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.

     

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  • 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.

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  • 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.

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  • 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.

     

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  • What is the meaning of Angel Fund?

    "Angel Fund” is a sub-category 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.

    For more information, click here.

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  • 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.

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  • 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

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  • What are Category I AIFs?

    Category I of the Alternative Investment Funds (AIF) include funds which invest in start-up, early stage ventures, social ventures, small & medium enterprises (SME), infrastructure or other sectors or areas which the Government or regulators consider as socially or economically desirable.

    It shall include venture capital funds, SME funds, social venture funds, infrastructure funds and such other AIF.

    For more information, click here

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  • What are Category II AIFs?

    Alternative Investment Funds (AIF) which do not fall in Category I and III and which do not undertake borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012 are Category II AIF.

    Various types of funds such as real estate funds, private equity funds, funds for distressed assets, etc. are registered as Category II AIF.

    For more information, click here

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  • What are Category III AIFs?

    Alternate Investment Funds (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.

    For more information, click here

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