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Assocham urges FM to resolve vexed issue of assured return on PE investment

In last 2 years, investments worth more than Rs. 3,200 crore have landed in courts. ASSOCHAM has suggested to resolve the pending issues make India a much more attractive destination for FDI

ANI  |  New Delhi 

Assocham to Jaitley: Set meeting with private equity to free stuck capital

In a bid to resolve the vexed issue of 'assured return' on private equity investment, industry body wrote to Minister Arun Jaitley, urging a meeting between his officials and the global private equity so that worth several thousand crores of rupees stuck in can be freed.

"Pre-agreed price rights and fixed ROE (Return on Equity) clauses have become an integral part of most private equity (PE) deals all over the world.Similarly, India witnessed an increasing trend where companies entered into such covenants and committed fixed ROE conversions either directly or indirectly. However these agreements have run into regulatory hurdles," the letter noted.

"This has led to a precarious situation of uncertainty over the exit of the investors from the deals and has affected the overall the market sentiments which has directly affected the fund raising ability of the Indian firms," it said in identical letters written to the Minister and Reserve Bank of India Governor Dr

It argued that while the government wants to earnestly address the issue of assured return for the investors for the future, it is equally important to address this issue with regard to earlier struck up at various stages of (like Arbitration, Courts).

In last two years, worth more than Rs. 3,200 crore have landed in courts. Therefore, to send right signals to attract the into the country, has suggested that the Ministry of and can invite the affected investors and discuss with them about the acceptable assured return as one time solution to resolve the pending issues which will help PE investors besides making India a much more attractive destination for "

While there seems to be a certain degree of choice in pricing for convertible securities, this is still subject to the overarching principle that foreign investor should not be entitled to any "assured exit price".

First Published: Fri, November 24 2017. 13:00 IST
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