GIFT The IFSC could be an attractive destination for private credit funds given the tax and regulatory benefits the financial center offers.
Srini Srinivasan, Managing Director, Kotak Alternative Asset Managers, said, “The private credit opportunities are huge and GIFT City is an ideal place to attract international capital. That’s why we are looking for more in the region. funds have been established.”
The Reserve Bank of India’s circular on evergreening of loans has resulted in many private credit funds in India taking a more cautious approach, experts said. This could lead to funds turning to the gift IFSC, which has a less regulated regime.
“Growing demand for alternative financing in India and growing global investor interest in Indian credit opportunities will fuel growth. GIFT IFSC is committed to investing in the global private credit market. It is also attractive to Indian fund managers looking for it,” said Vineet Sukumar, MD, Founder, Vivriti Asset Management and Co-Chairman, Credit Council, IVCA.
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Private credit investment in India is expected to reach $10 billion this year, according to an EY report. Experts say they are only a handful of the 171 alternative investment funds established as private credit funds at GIFT IFSC, but that number is expected to grow. Anicut Capital recently announced that it has received $11 million in dollar-denominated investments through its private credit fund 3, GIFT City Structure.
Ketaki Gol Mehta, partner at Cyril Amarchand Mangaldas, said, “While private credit funds set up under the Indian regime can only meet the debt requirements of Indian companies, GIFT IFSC’s funds will support companies around the world. We can provide direct financing.”
Funds set up under GIFT IFSC can invest directly through FPI structure or master feeder structure.
“The GIFT Fund has been established not only to act as an alternative to the Indian AIF but also as a feeder fund to invest in the Indian AIF, with the ultimate investment being made by the Indian AIF. The regulatory framework is more favorable than direct investment in private credit opportunities in India, which may require an FPI license,” said Nandini Pathak, Partner, Bombay Law Chamber of Commerce and Industry.
gift benefits
Establishing such a fund in the GIFT IFSC offers strategic advantages such as deemed offshore status, freedom to invest in foreign currencies without conversion, unlimited leverage subject to disclosure, tax pass-through status, and capital gains tax exemption for 10 out of 15 years. You can And GST is zero. It also eliminates the risk of double taxation and potential problems associated with PoEM, a test for determining the residency status of companies incorporated in a foreign jurisdiction. The regulatory framework in mainland India lacks such incentives, and investments are subject to FEMA restrictions.
“Investing in India through GIFT City IFSC credit funds offers a tax-efficient route for global investors. With a 10% tax rate and capital gains exemption on interest income on Indian bonds, this structure It is very attractive and often outweighs the benefits of a tax treaty while ensuring greater certainty and simplicity,” said Jaiman Patel, Partner, EY India.
far ahead
Mr. Pathak said the formation of the GIFT fund would not require an FPI license to underwrite bonds in India and Indian investors would also be expressly allowed to be pooled into the GIFT fund along with foreign investors. said it would increase.
Sukumar believes that to attract funding, compliance processes need to be further simplified and parity of service provision with established jurisdictions such as Singapore and Luxembourg needs to be ensured. He said internationally transferable custody rights, internationally acceptable arbitration, access to offshore listing markets and a stable tax system are the needs of the times.
