White Paper On Foreign Pvt Equity Planned

Confederation of Indian Industry unveils 13-point economic agenda

The Confederation of Indian Industry (CII) is preparing a white paper on ways to attract foreign private equity funds into India.

The chamber has estimated that about $3-5 billion of such funds will be available over the next few years. It has decided to target inflows of about $1 billion in the current year.

The paper is part of CIIs programme to identify alternative sources of finance for corporates. This is also a part of CIIs economic agenda forthis year.

Private equity funds represent a huge reservoir of invisible funds, which could be successfully directed to vital infrastructure sectors as well as finance expansion programmes of various companies, a CII official said.

 

Private foreign equity funds which typically have a life span of over 10 years target profitable companies with strong growth record to get assured returns on their investment.

Internationally, such funds invest in private companies through picking up minority equity shareholding (of generally non-voting shares) and taking positions on their board of directors.

However, their aim lies not in management control of these companies, but to monitor their performance in order to protect and guarantee the rate of returns to their investment.

The CII has decided to tap such overseas funds for bringing in investment into the resource-starved domestic infrastructure sector. Some funds like the US-based AIG Infrastructure Fund and Barings India Fund are already in the country.

Interest among foreign fund managers and institutional investors in the Indian economy has revived in recent months following the announcement of the 1997-98 budget proposals, feels CII president N Kumar. This is the time to find ways to lure the vast amount of funds available with foreign insurance and pension funds, besides the mutual funds operating there, he said.