The Securities and Exchange Board of India has released a document showing that 47 alternative investment funds in India have been registered as AIFs in India since August last year.
The wave of approvals result from new regulations brought in by the Indian government in August 2012, requiring private equity, hedge fund and other alternative asset vehicles to register with Indian regulators as alternative investment funds.
Importantly, the new regulations allow private equity funds to adopt more flexible structures, which has sparked a number of firms to adopt credit or debt-related strategies. Previously, AIFs were registered in India as venture capital funds, which was more restrictive in terms of the structures funds could take on.
Clearly there is an emergence of a domestic LP base [because these] AIF regulations essentially apply to Indian vehicles primarily raising capital from Indian investors
Siddharth Shah, partner, Khaitan & Co
“These regulations have provided a more conducive framework for operation in alternative asset classes because earlier VC regulations were inadequate because they were designed for venture capital investments,” Siddharth Shah, partner at Khaitan & Co in Mumbai, explained to Private Equity International.
The 47 registrations in less than a year is also a positive sign that SEBI is prepared to welcome alternative investments, as well as an indication that domestic LPs and GPs are active in the Indian market, according to Shah.
“It is definitely a positive indication and to be honest that is what has really sustained activity in the domestic market because the international fundraising environment has been extremely difficult over the past few years. A lot of GP activity has been sustained through domestic pools of capital – clearly there is an emergence of a domestic LP base [because these] AIF regulations essentially apply to Indian vehicles primarily raising capital from Indian investors,” he continued.
Private equity vehicles that have received approval from the Indian regulator include Kohlberg Kravis Roberts India Alternative Credit Opportunities Fund I, which was registered in August last year. KKR declined to comment on fundraising, but media reports said earlier the firm is targeting $1 billion for the vehicle.
Other firms registered recently are Kedaara Capital, Motilal Oswal Alternative Investment Trust, Avendus India Opportunities Fund III – another credit-related vehicle, as well as a number of real estate, infrastructure and hedge funds.