India’s CII says PE funds need more flexibility

Private equity funds should be allowed to invest up to 33.3 percent in equity shares or equity-linked investments and debt instruments of listed companies, according to the Confederation of Indian Industry (CII).

Private equity funds also need more flexibility, according to CII, to structure portfolios between listed and unlisted companies without having to establish multiple funds.

The trade organisation’s statements come on the heels of India’s securities regulator, the Securities and Exchange Board of India (SEBI), introducing new proposals over the country’s private equity industry in August.

Under the proposals, a fund would be categorised under a distinct asset class and governed by its own rules. For example, buyout funds would be restricted from investing in unlisted companies, though if classified as a PIPE vehicle, would be permitted to invest in small listed companies not part of any market index.

CII welcomes the regulator’s proposals.

“SEBI's proposed concept paper is a step toward a formal regulatory structure that would enable [alternative investment funds] to operate in an enabling regulatory environment,” said Chandrajit Banerjee, director general of CII, in a statement.

The SEBI has said its goal is to mitigate conflicts of interest in the private equity model and to monitor any risks the industry may pose.

The regulator cited a number of similar reform efforts underway in Europe (under the Alternative Investment Fund Managers Directive) and the US (under Dodd-Frank) as evidence of the need to supervise alternative investments.