A STUDY ON CORPORATE REGULATORY FRAMEWORK OF INDIA

Abstract

After the 1991 reforms, the Indian economy primarily relied on PE investments to drive capital growth. Demand for PE investments is rising in India as the economy recovers to pre-Covid levels. Private Equity firms buy non-listed private companies and restructure them before selling them for a profit. Private equity uses debt heavily to fund acquisitions, allowing for large returns on equity. The rules governing PE funds have changed dramatically in recent decades. However, the existing business regulatory environment is unfavourable to PE investments. Due to legislative constraints, PE businesses in developing nations use a customised model rather than the typical western approach. The existing PE regulation is illogical, superficial, and too rigid, impeding the smooth operation of PE investments. The Companies Act, 2013 incorporates anti-PE measures on private placement, mandatory convertible debentures, leverage buyouts, and director liability. Another issue is that the SEBI Regulations, particularly those governing Alternative Investment Funds, include few criteria that make PE investment difficult, such as valuing portfolio firms even at an early stage. The current SEBI AIF revisions did not depart from the preceding legislation in a way that benefited the PE regime. Concerns about exit strategies also deter potential PE investors.