Seek to bring transparency, standardised accounting

An umbrella organisation of venture capital (VC) and private equity (PE) funds has proposed some guidelines to bring transparency and standardise the accounting practices in the industry.

The proposed standards are on the lines of those issued by the European Venture Capital Association (EVCA).

The standards would also entail telling PEs and VCs how to be fair to their portfolio companies. This is linked to the reputation of the asset class in the country.

Ranjit Shastri, executive director, Indian Venture Capital Association (IVCA), a body representing active VCs and PEs in India, said, "One of the players may have done something illegal and unethical for which the entire industry is blamed. That shouldn't happen."

"Some of the guidelines would be mandatory and others would be recommendatory," he said.

He denied that the move was suggested by Sebi or that there is a threat of over- regulation from the stock markets regulator. However, IVCA is in consultation with Sebi, he said.

"It is an initiative to have better morals and ethics in the industry, to have transparency and confidentiality of information," he added.

It will also involve standardisation in terms of reporting of accounts to limited partners (LPs or investors abroad like pension funds or education institutions who hand over large funds to PEs/VCs for investing in India) and valuation of investee companies.

"With the economy being globalised, it is essential that we all speak the same language and have standardisation in terms of valuations and reporting. PEs and VCs in India should know what the LPs expect in China, the US or Canada," said Ram Iyer, director of accounting advisory services, KPMG.

IVCA is deliberating with PEs and VCs whether the European standards are suited for India.

Khyati Dharamsi/ DNA-Daily News & Analysis Source: 3D Syndication