India largest corporate house, the Tata group, is exploring the possibility of venturing into the private equity business. The company is in talks with leading investors in the US and Europe to raise a $1 billion fund for the Indian infrastructure sector.
According to highly placed sources, the group will also contribute to this fund, which in all likelihood will be registered in Mauritius.
The Tata group spokesman, however, denied any such development. "This is completely incorrect and speculative," he said.
The new venture, headed by Kishore Chaukar, managing director of Tata Industries, has already started talking to major funds in the US and Europe.
In the first phase the Tatas are expecting to get a commitment of around $300 million. “Once they get commitments for this amount they will start investing in Indian projects. Simultaneously, they will start raising the second tranche,” the sources said.
The Tata group has been considering such a venture for a while now. According to the original plan, the fund was expected to be registered in India. However, due to tax changes in the latest budget, the sources said the fund would now be registered in Mauritius, which has a tax treaty with India and where the long-term capital gains tax is zero if the investment is for over a year. Under a year, the tax rate is 10 per cent.
Finance Minister P Chidambaram, in the budget for 2007-08, restricted the pass-through tax benefits for venture capitalists to select research areas, among which infrastructure is absent.