Regulations impending investments from private equity funds: Experts

Speakers at the summit said tight regulations from SECP and SBP was preventing foreign/local investors from investing in private equity funds

KARACHI: A consultative workshop “Pakistan private equity regulatory regime” was held on Thursday by USAID in partnership with Securities and Exchange Commission of Pakistan (SECP).

During the workshop several issues pertaining to restrictions on private equity funds in realm of supporting and helping companies grow in various sectors of Pakistan’s economy were discussed.

Lakson Investments Executive Director and COO Kashif Mustafa said Pakistan-based equity funds possessed the potential of raising $50-100 billion in the next five to ten years from foreign and domestic investors.

Mustafa shared the equity funds had plans to invest in sectors like fashion outlets, tech companies, logistics, healthcare and education, reported Express Tribune.

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He added Pakistani equity funds had negligible share (around $200 million) in a global market of $4.6 trillion as of December 2016 and funds alone raised $600 billion in 2016, said Mustafa.

The panel of speakers shared the reasons as to why Pakistani equity funds had been unable to raise equity. It was blamed on strict regulations of State Bank of Pakistan (SBP) and SECP which prevent local and foreign investors from pooling into private equity funds, they said.

They added, SECP should allow provident funds, pension funds and insurance companies to pool investments in private equity funds and the central bank should relax regulations for foreign investors to pool investments in the country’s equity funds.

COO, Lakson Investments shared pension funds held a share of 33 percent in global private equity investment of $4.6 trillion and insurance companies had a 11 percent pie of it.

Legal pundit Muneeb Zia explained SBP regulations permit general foreign investment in listed companies but prevent negotiated foreign investment in developing and underdeveloped entities in Pakistan.

He added, SBP requires foreign investors to get a no-objection certificate (NOC) for negotiated investment cases and doesn’t permit repatriation of matured divestment if it looks higher than the break-up value.

While sharing the central banks view, SBP official said it doesn’t limit repatriation of dividend income and matured divestment to overseas, but foreign investors need an NOC in light of an investment being lesser than the book value of a company and repatriation size is larger than potential one.

On the other side, SECP Executive Director Imran Inayat Butt said the corporate regulator doesn’t permit insurance companies, provident and pension funds to invest in private equity funds due to their high-risk nature.

He added, that SECP couldn’t jeopardize putting public money at risk in private equity funds as several people have invested their life-savings in insurance companies, pension and provident funds.

SECP ED highlighted private equity funds provided no security or guaranteed protection and requested them to submit their suggestions to it and if they find them appropriate, the regulations could be reviewed.

 

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