UTI Bank is planning to set up a USD 500-million offshore fund, reports Economic Times. The bank received SEBI approval to start a PE fund in India as a domestic venture capital. It is now planning, to file for a fresh application as a foreign venture capital investor. The proposed USD 500-million fund marks the entry of UTI Bank in private equity.
“Though SEBI has given us approval to start asset management as domestic venture capital fund, we will file for a fresh application to register as foreign venture capital investor in a few weeks. The change in tax rules means that it is best if we have an offshore fund with UTI Bank`s contribution being the Indian component of the fund“ said UBL Asset Management Company CEO, Alok Gupta.
UTI Bank will provide USD 50 million equity as its principal sponsor, of the total equity of USD 500 million. The remaining part of the corpus will be raised from FIIs and other investors. The investments will be made through the bank`s subsidiary UBL AMC.
Objective of the proposed fund is to invest in infrastructure projects, hence, does not fall in the nine sectors identified in this year`s budget, where venture capital funds registered in India will continue to enjoy a pass-through status. Tax exemptions will now apply to biotechnology, nanotechnology, IT hardware/software, R&D for new chemical entities, seed research, dairy, poultry biofuels and large hotel-cum-convention centers.
According to the new rules, the private equity funds will pay taxes, if its investment does not fall in the nine specified sectors. Private equity funds, were earlier exempted from paying tax with its investors paying capital gains tax
Foreign funds, registered in Mauritius and having an asset management arm in India, remain unaffected from the changed law. If UBL AMC registers its fund in Mauritius, it will operate like any other foreign fund registered with SEBI and will be exempted from the proposed taxes.
Source : MyIris