SUMMARY
With 70 AIFs, and 50 fund management entities, GIFT IFSC has fast become a new gateway for PE/VC community, said panelists at Inc42's MoneyX
Singapore and Mauritius are asking PE investors what more can be done to stop them from moving to GIFT IFSC, said Dipesh Shah, executive director of GIFT IFSC
Unlike other regulators who dictate the terms and conditions, GIFT IFSC provides a playground without dictating the terms of game one needs to play: Siddarth Pai
The GIFT IFSC in Gujarat has triggered reverse flipping, and now countries like Singapore and Mauritius are asking private equity (PE) investors what needs to be done to stop them from moving to GIFT IFSC, according to Dipesh Shah, executive director (Development), International Financial Services Centres Authority, GIFT City.
Speaking at Inc42’s MoneyX, Shah, in a panel discussion, said GIFT IFSC has emerged as a new frontier for private equity firms.
Siddarth Pai, founding partner of 3one4 Capital, Tushar Sachade, partner at Price Waterhouse & Co LLP, and Kushal Agrawal, partner & CFO of Lightrock India, were also part of the panel.
Shah said, earlier, there was a trend of lots of entrepreneurs moving abroad from India for better opportunities and simpler regulations. “We have structured GIFT IFSC to stop this. Whatever tax and other benefits PE investors would get (there), we are offering similar facilities here.”
Speaking on the advantage of GIFT City, Sachade said since the formation of IFSCA in 2019, regulations have been revamped and brought on par with global standards.
Located on the banks of Sabarmati River, between Ahmedabad and Gandhinagar, GIFT City currently spans an integrated development area of 3.6 sq km. Plans are afoot to develop 5.76 sq km of built-up area comprising commercial zone (67%), residential area (22%) and social space (11%).
Initially developed under the Special Economic Zones Act of 2005, GIFT City was allowed to host the country’s first IFSC in 2019. The city’s commercial activities are under two distinctive zones – the GIFT SEZ (the non-IFSC area) and the GIFT IFSC. The latter became operational in 2020 after a bunch of favourable policy measures came into force, turning it into the new epicentre of AIFs and fintechs keen to tap into offshore markets without leaving Indian shores.
While GIFT IFSC makes it easier for foreign funds to directly enter the India market without using any pooled or feeder funds, Pai, founding partner of 3One4 Capital, which has also set up a subsidiary at GIFT IFSC, said that the IFSC has also made it easier for PEs to invest in overseas market without using any SPVs.
Unlike other regulators who dictate the terms and conditions, GIFT IFSC provides the playground without dictating the terms of game one needs to play, Pai added.
Earlier in December 2022, the board of the newly-formed Private Equity and Venture Capital CFO Association (PEVCCFOA) visited the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT) to discuss policy and operational issues related to PE and VC funds being set up at the tech city.
The International Financial Services Centres Authority (IFSCA) held discussions with the board members on business opportunities in IFSC, initiatives taken for ease of doing business, and the recent regulatory changes, the association said in a statement.
FM Nirmala Sitharaman, as part of Union Budget 2023, also took several measures aimed at accelerating the growth of the Indian startup ecosystem. Notably, IFSC (International Financial Services Centre) banking units and foreign banks will now be permitted to provide acquisition financing, paving the way for strategic mergers and acquisitions for Indian startups and corporate entities. Additionally, a subsidiary of the EXIM bank will be established to facilitate trade refinancing.
In her Budget speech, Sitharaman also revealed plans to set up data embassies in GIFT IFSC (Gujarat International Finance Tec-City) for countries seeking digital continuity solutions. This initiative will provide a supportive legal, regulatory, and robust digital infrastructure at GIFT IFSC.
As more national and global corporations enter the scene, GIFT IFSC is rapidly gaining prominence as a globally competitive financial platform operating under a special offshore status, attracting overseas capital. Its goal to globalize India’s fast-evolving financial sector may further propel the country’s journey towards becoming a $5 Tn economy by 2026-27, as projected by the International Monetary Fund.
To expedite operations and innovation at GIFT, the government established a single-window regulatory structure for IFSCs through a 2019 Act. The International Financial Services Centres Authority (IFSCA) has since acted as a unified and agile financial regulator for GIFT IFSC, amalgamating the regulatory powers of key entities like the Reserve Bank of India, SEBI, IRDAI, and PFRDAI to resolve inter-regulatory matters.
To promote growth, various fiscal incentives have been provided, including zero-Goods and Services Tax (GST) for GIFT IFSC-registered firms.
Furthermore, GIFT IFSC boasts of a flexible regulatory framework to encourage the establishment of greenfield funds or tax-neutral relocation of funds from overseas jurisdictions. Notably, foreign investors have the advantage of transacting in USD instead of dealing in INR, streamlining the process and reducing bureaucratic delays.
Presented in partnership with Peak XV Partners, supported by Venture Catalysts, JSA, Samsung, IVCA Associates, Indian Angel Network, JIIF and Marwari Catalysts, MoneyX is aimed at bringing the driving forces of the Indian startup ecosystem under a single roof.
