UTI Ventures plans to raise $450m via offshore fund

NEW DELHI: UTI Ventures — the private equity arm of UTI Mutual Fund — is planning to raise $400-450 million through an offshore fund. The proposed fund, which will be its third in seven years, will be set up as an offshore entity in tax-haven Mauritius.

The Bangalore-based PE player currently manages funds in excess of $200 million. Sources close to the company say the PE player has already started raising money for its offshore fund. “The company is raising its third fund which would now be incorporated in Mauritius due to the change in tax laws. It will be closed over the next few months,” a source close to the company said. When contacted by ET, MD & CEO UTI Ventures Raja Kumar declined to comment.

The proposed fund will have the mandate to invest across sectors and will be a growth capital fund. UTI Ventures has raised $30 million in its fund in 2000 and another $170 million in its second fund in 2005. Though it is yet to deploy a significant chunk of its existing fund, the PE player is mulling an offshore fund so as to ensure the proposed fund does not come under the ambit of additional taxes that will be levied on private equity players incorporated in India.

In this year’s Budget, income-tax exemptions for venture capital funds registered in India has been restricted to nine sectors including biotechnology, nanotechnology, IT hardware/software, R&D for new chemical entities, seed research, dairy, poultry biofuels and large hotel-cum-convention centres. If domestic venture capital funds invest in any other sectors, they will have to pay taxes now.

Till now, these funds had a pass-through status. Foreign funds, which are registered in Mauritius and only have an asset management arm in India, will remain unaffected from this restriction. UTI Ventures has invested in 10 IT and ITES companies including Subex Systems and Foursoft. It has also invested in two retail chains including Koutons Retail India.