UTI Bank To Come Out With $500-M Offshore Fund

UTI Bank is looking at setting up a $500-million offshore fund. The bank, which had earlier obtained Sebi approval to start a PE fund in India as a domestic venture capital, will now file for a fresh application as a foreign venture capital investor. The proposed $500-million fund also marks the entry of UTI Bank in private equity. Of the total equity of $500 million, UTI Bank will provide $50 million equity as its principal sponsor. The remaining part of the corpus will be raised from FIIs and other investors. The investments will be made through the bank''s subsidiary UBL AMC. Since the mandate of the proposed fund will be to invest in infrastructure projects, it does not fall in the nine sectors identified in this year''s Budget where venture capital funds registered in India will continue to enjoy a pass-through status. Tax exemptions will now only apply to biotechnology, nanotechnology, IT hardware/software, R&D for new chemical entities, seed research, dairy, poultry biofuels and large hotel-cum-convention centres. Foreign funds, registered in Mauritius and only have an asset management arm in India, remain unaffected from the changed law. Therefore, if UBL AMC registers its fund in tax-haven Mauritius, it will operate like any other foreign fund registered with Sebi, exempted from the proposed taxes.