PEs will have to reveal more

The Securities and Exchange Board of India will soon make it mandatory for international and domestic private equity and venture capital funds to submit quarterly investment reports to the regulator.

Currently, foreign and domestic venture capital funds registered with Sebi have been voluntarily submitting quarterly investment reports to the regulator.

Market sources said foreign and domestic venture capital funds, generally, are secretive about their investments, making it difficult for the regulator to keep a tab on their investments in India.

At present, there are about 80 foreign venture capital investors and 90 domestic venture capital funds registered with the Sebi.

The reason cited for the new rules is that as a regulatory body there was a need for the maintaining reliable data on PE/VC investments. Globally, private equities are neither regulated nor are their investments kept track of by the regulators.

In India, private equities can come through three routes: foreign institutional investors of whom Sebi maintains a record, foreign direct investment, the data for which can be obtained from the Reserve bank of India, and foreign venture capital investors, which now Sebi has started collecting.

FVCI investments is not reported mandatorily to the Sebi, though they disclose the data when asked by the Sebi.

Last month-end, Sebi released some numbers on venture funds and foreign venture capital investors registered with it. According to the data, the total venture capital investments increased from Rs 8,183 crore (Rs 81.83 billion) in September 2006 to Rs 20,310 crore (Rs 203.1 billion) by June 2007.

VC investments in real estate and information technology declined 22 per cent and 7 per cent, respectively, during the period even as telecommunications, services, pharmaceuticals and media saw a surge in investments.

Industry players said PE and VC funds generally reveal their investment details only to their sophisticated overseas investors, also called as limited partners.