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Aif Commitments See A Whopping 42% Rise In Fy22 With Private Equity, Debt Funds Accounting For Majority Share

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The Indian AIF industry continues to grow at a healthy pace with the commitments rising 42 percent to Rs 6.41 lakh crore in March 2022 compared to the same period last year, a CRISIL report released on Thursday showed.

The funds raised in financial year 2022 were Rs 3.14 lakh crore, up 36 percent from the previous year. Of the funds raised in the year, Rs 2.84 lakh crore was invested as of March 2022, the report added.

AIF or Alternative Investment Fund is a privately pooled investment fund where sophisticated investors together put in money to invest in unconventional categories such as venture capital, real estate, SME funds, among others.

Between March 2020 and March 2021, the AIF commitments had increased 22 percent to Rs 4.51 lakh crore. The funds raised increased by 23.32 percent during the period to Rs 2.3 lakh crore, of which, Rs 2 lakh crore was invested as of March 2021.

The growth has been spearheaded by Category II, which formed 81 percent of the total commitments in fiscal 2022, said CRISIL.

While Category I includes venture capital funds, Category II includes equity funds (listed and unlisted), real estate funds and debt funds and Category III includes long-only equity funds and long-short equity funds.

Source: SEBI

However, Gopal Srinivasan, Founder, TVS Capital Funds, said that the Indian AIF industry was still in the nascent stage and that there was a need to scale it up by at least 5-10 times to Rs 20-25 lakh crore as “we’ve only just begun”. It should be made easier for investors by democratizing access for them to be able to just “click and pick” as is the case now with digital payments that have come far.

“When the capital is here, why should we export our profits,” he added.

Sub-category-level benchmarks

CRISIL Research on Thursday launched sub-category-level benchmarks for for the domestic AIF industry to help decision making by stakeholders. The benchmarks, which are in accordance with SEBI’s guidelines, were developed after consultation with industry participants.

“The sub-category level benchmarks will be useful to all stakeholders — investors, intermediaries, and AIFs alike — as they provide a 360-degree view of the performance of a particular sub-category,” said Piyush Gupta, Director, CRISIL Research.

The sub-category benchmarks come after the category (I, II, III) level benchmarks were introduced in 2020. The sub-category-level benchmarks would allow comparison of AIFs in seven sub-categories under I, II and III broad categories which include listed or unlisted debt, equity, real estate funds and others.

Source: CRISIL Research

The deals in the private equity market have risen sharply in 2021.

*Note: The line graph represents value of deals (in $bn) and the bar graph represents number of deals

The benchmarking will help investors select the most suitable fund based on their objectives, allow intermediaries to focus on the most accurate funds for their clients and a comparison for AIFs’ performances.

“With investors embracing the product and the industry maturing, there is a need for enhanced benchmarking practices,” said Jiju Vidyadharan, Senior Director, CRISIL Research, adding that the benchmarks will bridge the gap and enable “like-to-like fund comparison within its category”.

First Published:  IST

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