PE investments jump 55% to all-time high of $24 bn across 591 deals in 2017

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Flipkart received India’s largest ever PE investment of $2.5 billion in a single round from Softbank

Private equity firms invested $23.8 billion across 591 deals in 2017, making it the biggest year for PE investments in India, says a report.

According to deal tracker Venture Intelligence, the investment value is 39 per cent higher than the previous high of $17.1 billion (recorded in 2015) and 55 per cent higher than $15.4 billion invested during 2016. In terms of number of deals the year 2017 saw 21 per cent less activity as compared to 2016 (731 deals), indicating large number of big-ticket transactions.

“The year witnessed 31 investment deals with size greater than USD 200 million, aggregating to $15.4 billion or 65 per cent of the total investments,” the report said. These figures include venture capital investments, but exclude PE investments in real estate.

In terms of industries, IT/ ITeS companies accounted for 45 per cent of the value pie attracting $10.7 billion worth investments across 325 transactions.

Flipkart received India’s largest ever PE investment of $2.5 billion in a single round from Softbank and another $1.4 billion from strategic investors Tencent, eBay and Microsoft. Softbank also invested $1.4 billion in mobile wallet and payments firm One97 Communications, which owns the Paytm brand. BFSI (Banking, Financial Services and Insurance) companies continued to enjoy the second spot attracting $4.40 billion across 61 transactions.

The sector was led by Bain Capital’s $1.04 billion investment in Axis Bank — the largest ever single investment in the sector — and Warburg Pincus’ $384 million pre-IPO investment in ICICI Lombard General Insurance.

On the back of its two mega bets (Flipkart and Paytm), Softbank emerged as the largest investor during the year with investments totaling over $4 billion (including a $250 million investment in Oyo Rooms).

Other top investors include Canadian pension fund CPPIB with $2 billion investments across five companies; while Warburg Pincus invested $1.6 billion across nine companies, and KKR invested about $680 million.

China’s Tencent emerged as a significant strategic investor in the Indian Internet and mobile sector with investment of $1.1 billion across home grown leaders like Flipkart, Ola, Byjus Classes and Practo.

 

Source: Business Standard

Young entrepreneurs to get more funding from govt

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To support young entrepreneurs, the central government will launch ‘special funds’ for those in the 16-21 years and 21-26 years age groups.

“It’s on the drawing board. We have accumulated funds worth Rs 9,000 crore under the technology cess category, and we want to use this. We might launch incubation centres, innovation hubs and even funds. This country requires investments of Rs 10,000 crore annually if we want to give boost to entrepreneurship,” said Y S Chowdary, ministry of state for science & technology and earth sciences.

He was speaking on the sidelines of the 11th edition of Indian Science and Technology Entrepreneurs Park & Business Incubators Association (Isba) here on Saturday.

The fund will be over and above the Rs 10,000 crore fund-of-funds for start-ups announced by the government early this year.

Over the past two years, the funding to several government departments supporting incubation in India has seen a spurt. H K Mittal, advisor, Department of Science and Technology (DST), said that the support for incubators has gone up 10 times.

“DST’s finance has gone up by at least 4.5x to Rs 180 crore for FY17. Several of our programmes like ‘Power of Idea’, Eureka and Entrepreneur-in-residence have seen their fund corpus going up. Our seed support programme has gone up five times. We can now fund start-ups starting from Rs 50 lakh to Rs 1 crore,” he added.

According to Kshatrapati Shivaji, chairman and managing director of Sidbi, the idea behind creating the fund-of-funds was to give a push to domestic venture capitalists (VCs). “We have already committed Rs 800 crore across 19 VCs, which, in turn, will mobilise the investments.”

The event also saw the signing of the first Indo-US Joint Early Stage Fund with a corpus of $40 million. About 50 per cent contribution for the fund comes from incubators that come under Isba and India Electronics & Semiconductor Association and the rest of the funds will have contribution from high net worth individuals based out of the US and serial entrepreneurs such as Sanjay Sharma, CEO of Roambee Corporation. At present, Isba supports around 100 incubators across India.

NURTURING YOUNG MINDS

  • The Centre to launch ‘special funds’ for those in the 16-21 years and 21-26 years age groups
  • The govt has accumulated funds worth Rs 9,000 crore under the technology cess category, said Y S Chowdary, ministry of state for science & technology and earth sciences
  • Over the past two years, the funding to several government departments supporting incubation in India has seen a spurt
  • Government’s seed support programme has gone up five times. The Centre plans to fund start-ups starting from Rs 50 lakh to Rs 1 crore
  • The 11th edition of Isba (Indian Science and Technology Entrepreneurs Park & Business Incubators Association) also saw signing of first Indo-US Joint Early Stage Fund with a corpus of $40 million

Source: http://www.business-standard.com/article/companies/young-entrepreneurs-to-get-more-funding-from-govt-116091200303_1.html

Startups get much awaited tax exemptions

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In a major incentive, startups can now issue shares to investors at higher than fair value without worrying about tax consequences.

The Central Board of Direct Taxes (CBDT) has notified the much awaited tax exemption on investments above fair market rate for startups.
“The exemption provided to startups from the ‘rigour’ of section 56(2)(viib) of Income Tax Act has been long awaited,” Amit Maheshwari, Partner Ashok Maheshwary and Associates LLP, said.

The effect of the CBDT’s notification is that in case a startup gets investment from resident angel investors, family offices or funds which were not registered as venture capital funds, it will not be taxed even if the investment is made in excess to the fair value.

“It has been a long standing industry demand to abolish this Angel tax,” Maheshwari said.

A startup is a company in which the public are not “substantially interested” and conforms to certain conditions as prescribed by the Department of Industrial Policy and Promotion (DIPP) in February this year.

Under Indian tax law, if an Indian company receives share subscription amount from an Indian resident which exceeds the fair value of shares, then the excess amount is taxed as income of the Indian company, said Rajesh H Gandhi, Partner, Deloitte Haskins and Sells LLP.

“The notification now exempts startups from this rigorous provision. This is a welcome relaxation and would ensure that startups can issue shares to investors at higher than fair value without worrying about any tax consequences,” Gandhi said.

A similar exemption already exists for Venture Capital Funds (VCFs).

Maheshwari said this Angel tax still poses threat to earlier investments which could be perceived as being overvalued in light of the declining valuations globally and in India.

Last week, the DIPP has launched a portal and mobile app through which startups can gather all latest updates on various notifications, circulars issued by various departments and different funding agencies.

In January, Prime Minister Narendra Modi had unveiled a slew of incentives to boost startup businesses, offering them a tax holiday and inspector raj-free regime for three years, capital gains tax exemption and Rs 10,000 crore corpus to fund them.

Source: http://www.businesstoday.in/current/corporate/startups-get-much-awaited-tax-exemptions/story/233953.html

Foreign investment quality improves substantially with PM Narendra Modi’s Make in India push

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The quality of foreign investment coming into the country has improved substantially, according to Reserve Bank of India data.

Much of this is foreign direct investment (FDI) materialised in the September 2014-November 2015 period after Prime Minister Narendra Modi launched the Make in India campaign and bettered portfolio inflows during the period.

Gross FDI inflows amounted to $62.6 billion, 31% higher than $47.6 billion in the preceding 15 months.

This is more than triple the amount of net portfolio inflows of $14.3 billion in the same period. An analysis of the monthly trend in foreign investment inflows shows that in most months stable long-term FDI has been more than portfolio inflows, which have been more volatile in the period.

Economists say the surge in FDI is largely due to several initiatives by the government to attract investment in the manufacturing sector. “FDI and portfolio flows over the past year-and-a-half suggest that conscious efforts of the government to encourage more stable direct investments are yielding results,” said Saugata Bhattacharya, chief economist at Axis Bank. “At a time when global capital markets have become volatile, FDI flows reduce uncertainty about foreign capital outflows and, consequently, currency volatility.”

The surge in FDI in India is significant given that investment across the world has fallen by 16%, said Amitabh Kant, secretary at the Department of Industrial Policy and Promotion, at a recent event.

Though a sizeable amount is estimated to have gone to the manufacturing sector, including consumer goods and food processing, among others, a section of the market feels that a portion of the FDI inflows could have come through the private equity route.

This seldom finds its way into greenfield projects but at the same time provide an important source of finance for entrepreneurs.

“A significant part of the higher FDI has come in as PE and VC funding, which helps finance entrepreneurs,” said Bhattacharya.

Prime Minister Modi’s Make in India initiative is aimed at turning the country into a global manufacturing hub to generate jobs, raise incomes and drive growth.

The government has been seeking to drum up investment as part of this effort. India’s growth is being driven by public spending and consumption with private investment yet to kick in substantially.

Source:  http://economictimes.indiatimes.com/articleshow/50764021.cms