INDIA Law and Practice Contributed by: Lalit Kumar, JSA Advocates and Solicitors
1. Trends 1.1 VC Market
long-term capital gains on unlisted shares, from 20% to 12.5%. This will lessen the tax burden on the selling shareholders, thus resulting in investors earning a better rate of return on exit. These reforms, along with a more liberal regula - tory regime, are expected to give momentum to venture capital investments. It is expected that VC funding will go deeper into tier 2 and 3 cities, such as in the hospitality sector and tourism- related industries. 1.3 Key Industries The sectors/industries which attracted venture capital in the last 12 months include e-com - merce and quick commerce, fintech, health tech, EVs and EV infrastructure-related compa - nies, edtech, financial services, consumer tech companies, consumer retail, software, shipping and logistics. Many consumer technology com - panies raised funding through IPOs. As far as exits are concerned, most exits were seen in the fintech and consumer retail sectors. Venture capital vehicles used for investments are generally set up as a company, trust or limited liability partnership. Venture capital investment can be made in the form of (i) foreign investment; or (ii) domestic investment. Different provisions apply to these investments, as provided below. Foreign Investment For foreign investment, several routes are avail - able to make the investment. The common form of investment is foreign direct investment (FDI), foreign portfolio investment (FPI) and foreign venture capital investment (FVCI), as described below. 2. Venture Capital Funds 2.1 Fund Structure
Venture capital transactions showed huge growth in 2024, rising substantially on a year- on-year growth basis. As a result, venture capi - tal deal activity in India showed an uptick trend. This will be good for India in maintaining its posi - tion as a favourable venture capital transactions market. Good quality companies, founders and sectors attracted substantial funding from ven - ture capital funds. To add to this, India’s robust public capital markets encouraged companies to successfully raise huge public funds and attractive returns to investors who exited in the IPO. Several sectors attracted VC funding. The prominent ones include quick commerce, soft - ware, consumer technology, consumer retail, fintech, deep tech, EV and EV infrastructure- related companies. These new age companies outpaced fund raising as compared to the more traditional ones. As per Bain & Co, India Venture Capital Report 2025, some notable deals of 2024 for primary investments include Zepto, Meesho, Lenskart, Rapido, Rebel Foods, Physic Wallah and Oyo. As per the same report, some notable exits include exits of investors in Policy Bazaar, Paytm, Mamaearth, Indigo Paints and Prataap Snacks. Companies that went public through IPOs include Swiggy, Ola Electric, Awfis, Travel Boutique and Suraksha Diagnostic. 1.2 Key Trends A major announcement in the Union Budget of 2024 abolished the controversial angel tax for all classes of investors. This tax was levied on the premium paid on issuance of shares by investee companies. This is a welcome move, which is expected to boost venture capital deal making. Another major reform is the reduction in
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