About 20 entities seek AIF approval from SEBI

Out of the 20 pending applications for alternative investment funds, SEBI said 15 applications are "being processed", while it has sought further details from five others

New Delhi: As many as 20 entities have sought Securities and Exchange Board of India (SEBI)'s approval to set up alternative investment funds (AIFs), a newly created class of pooled-in investment vehicles for real estate, private equity and hedge funds, reports PTI.


SEBI has already allowed seven AIFs to set shop in the country, all of which got their approvals from the market regulator last month.


As per the latest SEBI data, 20 applications were pending with SEBI for registration as AIFs as on 31 August 2012.


The regulator had notified in May this year the guidelines for a new class of market intermediaries named AIFs, which are basically funds established or incorporated in India for the purpose of pooling in of capital from Indian and foreign investors for investing as per a pre-decided policy.


Out of the 20 pending applications, SEBI said 15 applications are "being processed", while the regulator has sought further details from five others as they had provided "incomplete information" as on August 31.


Most of these applications were filed in August, while some were submitted in June and July as well.


SEBI last month decided that the promoters of listed companies can offload 10% of equity to AIFs to attain minimum 25% public holding.


Among others, the registration has been sought by CapAleph Indian Millenium Fund, DSP BlackRock, HDFC AMC Real Estate, India Advantage Fund, India Realty Fund, Kedaara Capital, Kotak Alternative Opportunities Fund, Real Estate Opportunities Trust and Start-up Village Fund.


Besides, the entities whose applications have "incomplete information" are -- CapAleph Indian Millenium Private Equity Fund, DARC MentorCap Film Fund, IIFL Opportunities Fund, IIFL Private Equity Fund and L&T Infra Investment Partners.


Already SEBI-registered AIFs include IFCI Syncamore India Infrastructure Fund, Excedo Realty Fund, Sabre Partners Trust and KKR India Alternate Credit Opportunities Fund.


Under SEBI guidelines, AIFs can operate broadly in three categories. The SEBI rules apply to all AIFs, including those operating as private equity funds, real estate funds and hedge funds, among others.


The Category-I AIFs are those funds that get incentives from the government, SEBI or other regulators and include Social Venture Funds, Infrastructure Funds, Venture Capital Funds and SME Funds.


The Category-III AIFs are those trading with a view to make short-term returns and include hedge funds, among others.


The Category-II AIFs can invest anywhere in any combination but are prohibited from raising debt, except for meeting their day-to-day operational requirements. These AIFs include PE funds, debt funds or fund of funds, as also all others falling outside the ambit of two other categories.



R Balakrishnan

5 years ago

Love the name "Syncamore"! Has a nice sound to it.

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SEBI fears round-tripping through overseas cell companies

Funds structured as PCCs, which are legal entities in places like Mauritius, might be looking at a re-entry into Indian markets through routes like foreign venture capital funds and other avenues for round-tripping of funds

New Delhi: Securities and Exchange Board of India (SEBI) is looking into the possible use of protected cell companies (PCCs) from places such as Mauritius, Cayman Islands and Seychelles for use of round-tripping of Indians' money back into capital markets in the country in the form of overseas funds, reports PTI.


In 2010, SEBI had barred PCCs to invest in Indian markets through foreign institutional investor (FII) route after it came across instances where certain Indians had used these entities to route their money back into markets as FII funds.


However, the market regulator now fears that funds structured as PCCs, which are legal entities in places like Mauritius, might be looking at a re-entry into Indian markets through routes like foreign venture capital funds and other avenues for the purpose of round-tripping of funds, a senior official said.


PCCs are specially designed entities that might comprise of various cells, having funds of various investors, in such a manner that there is legal segregation and protection of assets and liabilities for each cell.


Also, the insolvency of one cell does not affect the business of the entire PCC or that of the other cells.


Besides getting tax-related benefits for being considered as a single entity despite having various cells, foreign banks in the past have been found to be hard-selling these schemes to their wealthy clients for the protection of identity as well, the official said.


With an aim to safeguard the markets from any attempts of round-tripping of funds in contravention to the regulatory framework, SEBI is keeping a close eye on the foreign funds seeking to invest in the country, the official said.


The market regulator is also consulting the Reserve Bank of India (RBI), as well as other regulatory and administrative authorities, whenever it has a suspicion about some PCC disguising as FII, or a PCC seeking entry through routes like foreign venture capital funds for round tripping of funds, sources said.


A PCC-structure entity having collected funds from a large number of investors from abroad for investment purpose does not pose any risk to the Indian markets, but there has been instances wherein the funds have actually come from Indian investors, the official said.


Mauritius has been often alleged to be a key place used for round-tripping of funds back into India through overseas investment routes.


However, a few other places like Cayman Islands and Seychelles have also been blamed for similar practices, largely on account of these being investor and tax-friendly jurisdictions.


In Mauritius, PCC structure has been in place since the year 2000. There, PCCs are granted license to operate as a category of global business company (GBC), which can be in form of a trust, society, partnership or any body of persons, and are allowed to invest in overseas markets.


Funds coming through Mauritius have already been under scanner of Indian authorities for routing of black money in form of the FII and FDI inflows.


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