Likely to increase capital allocation to startups on abolition of angel tax, tax parity as well as valuation reset
New Delhi: Family offices of millionaires are likely to increase capital allocation to new age companies following the parity being brought in via long term capital gains (LTCG) tax which would be reduced to 12.5% on unlisted stocks and the abolition of angel taxes announced in the Union Budget 2024-25 on Tuesday
Family offices, about 300 now from around 45 in 2018-per a PwC report, have increased their activity over the past year in terms of investing in startups but the budget announcement will give a major boost to star tup investments, a senior executive at a top family office fund said. “This would be a significant attraction forward to invest in private companies. Two things are at play-firstly, the disparity between listed and un listed stocks was a hurdle and now a lot more domestic capital is available to back tech companies with sustain able models,” the executive mentioned above said.
ET reported on July 24 saying the particular change is especially significant given the increase in exits by early-stage investors through secondary stake sales-a growing trend when primary capital funding is still constrained.
“There will be an incentive now on such exits over a period of time which is typically six to eight years,” the person mentioned above said.
Premji Invest-the family office of Wipro founder Azim Premji-is among the first family offices have started investing in new-age firms and now is one of the largest investors in the space.
well as directly in companies Ranjan Pai’s Claypond Capital. Zerodha’s Nikhil Kamath. Manyavar Family Office and many such invest-
Looking Out
Companies like FirstCry, Oyo, Aakash Institute, Bluestone and others have raised significant capital during the course of this year: “Among Indian family offices, fin tech is a key attraction that raised a total funding of $853.6 million in CY23, Indian family offices are al- so setting up offices abroad to tap global investment opportunities,” the PwC report said.
“”The reduction in L’TCG in case of unlisted securities may encourage domestic investors to allocate more capital into the startup ecosystem which can help improve the local domestic funding scenario,” Amarjeet Makhija, partner and leader – star- tups, PwC India said on Wednesday.
Klaas Oskam, CEO of investment banking firm DC Advisory India said in general, a lot of family offices have started to dip their toes in the water by starting to explore startups (as an asset class).
source-Economic Times
