Investors flock back to equity, PE funds on Covid vaccine hopes

MUMBAI: Some of the large investors who had committed money to the capital market and private equity funds and were holding back due to uncertainty around Covid pandemic are now flocking back. The sudden surge in investment activity is also backed by the hopes that the Covid vaccine is set to boost the Indian investment activity even further.Many investors had triggered a clause whereby they could postpone their investments or opt out of a few investment deals in Foreign Portfolio Investors (FPIs) and PE funds for investing in India.Both in FPIs as well as PE funds, investors tend to give commitments when they raise funds and money or draw down is given at the time of actual investments. For many PE funds the deals have already dried up and only a handful of the remaining are happening. For FPIs on the other hand, the investment commitments matter more as most of them tend to trade on a regular basis.Industry trackers say that several Alternate Investment Funds (AIFs) that have investments from HNIs were also facing this issue.This comes at a time when the FPI investments in India have hit a record high. FPIs have pumped in around Rs 1.4 lakh crore in the Indian equities in the last eight months.This also comes at a time when travel restrictions have been relaxed and many fund managers of foreign funds that were stuck in India could not travel back. Fund managers sitting out of Mauritius or Singapore and had moved to India due to Covid-19 pandemic. Many had also reached out to their tax advisors fearing that the funds may have become taxable in India.The worry is that the regulations dictate that a fund can be taxable in a jurisdiction where the manager or the decision maker is based for 30 days. With extension in lockdown, their stay in India would be more than a month, hence the concerned fund managers want their tax advisors to figure out a workaround.As per the current taxation regime any country where decisions are taken or where a decision maker is located creates a permanent establishment. And that jurisdiction where a permanent jurisdiction is created has a right to tax the global income of the company or a fund.
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