PremiumMUMBAI: Notwithstanding covid-led disruptions, alternative investment funds (AIFs), which invest across asset classes, such as venture capital, private equity and credit, infrastructure and real estate, have managed to get commitments worth over ₹35,000 crore in the first half of the current fiscal.
According to data from markets regulator Securities and Exchange Board of India (Sebi), AIFs raised commitments worth ₹35,129.6 crore between April and September, up from ₹34,715.4 crore in the year-ago period.
To be sure, in the second half of FY20, AIFs had raised ₹53,124.3 crore, as per the Sebi data.
There are three categories of AIFs. While category I comprises infrastructure, social impact and early-stage venture capital funds, category II deals with private equity and credit funds, besides venture capital funds. Category III funds investment in public markets.
“Fundraising did go slow, but it has kept pace with last year. However, it could have been substantially better than last year given the number of new fund registrations happening pre-covid. But keeping in mind the overall sentiment in the economy and the outlook that the industry had when covid struck in March, I think we are at a reasonable level of fundraising activity," said Tejesh Chitlangi, senior partner at law firm IC Universal Legal.
Chitlangi added that after the initial impact of the pandemic, new fund registrations have picked up strongly since September. "The time taken for new Sebi registrations has also improved."
Sector-specific funds, such as consumer, pharmaceuticals and technology, have done relatively well on the fundraising front, he said, adding that category III funds, despite rising markets, have been slow due to tax concerns.
Most of the capital was raised by category II AIFs. These funds raised ₹32,296 crore in H1FY21.
“Significant fundraising has been in category II funds. Almost all the benefits of category I funds have also been made available to category II and, in fact, category II offers much more flexibility compared to category I. So, many of the classic venture capital funds have also shifted to category II for their latest funds," said Chitlangi.
Activity has also been picking up for debt funds as concerns of widespread defaults ease with economic revival witnessed over the past few months.
“We are seeing activity pick up in debt funds in the past few months. January-to-June fundraising was slow on the debt side due to concerns on defaults. But, slowly and gradually, things are shaping up for this category of funds," said Chitlangi.
“There has been a long period of lull in activity in debt funds following the Infrastructure Leasing and Financial Services (IL&FS) crisis. But now, we are gradually seeing investor interest shifting back to debt funds," Chitlangi added.
