INTERVIEW
By
Vishal Bhidu
Neha Malviya Kulkarni is the Chief Growth Officer at SuperNAV and boasts of an incredible experience in the financial services industry where to her credit she is behind the setting up of numerous funds across diverse jurisdictions not only restricted to India but also Mauritius, Cayman Islands, Singapore VCC and Bermuda. She has been involved in the growing fund structures globally-onshore and offshore fund set up, GIFT City, AIF, and spreading across Fund Management Compliance. Her expertise in structuring investment vehicles have garnered attention where she has been recognized in leading national financial newspapers such as The Economic Times, Business Standard, Financial Express, HT Mint, and Forbes India Magazine. These Publications have featured her insights and contributions to the financial services Industry on numerous occasions.
Neha has 16 years of experience across leadership roles both in India and international Compliance and Legal advisory pertaining to SPVs, CIS, PCC and close-end fund structures where in this exclusive interview to Platform Africa, she discusses at length on the Variable Capital Companies (VCC) across jurisdictions such as India, Singapore and Mauritius, feeder investment, and the Special Vostro Rupee Accounts as well as the P-Notes being looked at with growing interest by investors eyeing the booming Indian market as we speak about foreign investment.
- You have a huge experience spanning across financial services jurisdictions such as India, Cayman Islands, Bermuda and been instrumental in setting up a gamut of overseas fund vehicles, structuring and advising on investment funds in Mauritius. In the context of changing tax structures such as DTAA and amid talks about making a shift towards structured cum substantial investment as well as feeder investment making the buzz, what are the right fund structures and right asset class that can be tailor-made for a jurisdiction like Mauritius as well as its trading partners such as India?
Neha: Each Fund jurisdiction has its own unique advantages and challenges, such as India’s Gift City, Bermuda’s CIS, or Cayman Islands’ Segregated Portfolio Companies. In terms of DTAA, India has not given MFN status to any specific country, except for OECD countries, although there is less investment from OECD countries. Thereby not offering any favourable Tax advantage to any specific country.
Fund and/or asset managers seek flexibility and reliability from any fund jurisdiction. And in this context, the Mauritius’ VCC offers such flexibility and reliability, allowing for close and open-ended funds to be grouped together under one legal entity with legal ring-fencing. The fund ecosystem in Mauritius is more developed as compared to other jurisdictions. Similarly, India’s Gift City has also issued VCC regulations and is trying to adopt a similar model as SVCC. Although there are several other considerations to be evaluated before deciding on the right fund structure, however, regardless of the asset class, Mauritius’ VCC structure can be the apt fund structure for the island and its trading and Investment partners, such as India.
2. Recently, a double tax agreement was signed between Hong Kong and Mauritius and what is your assessment to the extent that it lends clarity to investment as we speak about SPV and fostering cross-border investment as well as foreign flows not restricted to the island but also to the Asian region, including India?
Neha: The double tax agreement between Hong Kong and Mauritius is a positive development for investment flows taking place between the two jurisdictions. It provides clarity on tax obligations for investors and companies, especially those using Special Purpose Vehicles (SPVs) to invest in each other’s markets. This agreement not only benefits Mauritius and Hong Kong but also other countries, including India, that receive investment flows from these two jurisdictions. The agreement helps in fostering cross-border investment by reducing tax-related hurdles and creating a more conducive environment for foreign investment. In particular, the master-feeder structure is likely to benefit from this agreement, enabling seamless investment in India with reduced tax obligations for investors.
3. There have been many opinion articles speaking about the role of the master-feeder when it comes to investment. Can you explain how the whole concept works to the benefit of investment, encompassing master funds set against increasing scrutiny and/or compliance?
Neha: Master-Feeder Funds are a two-tier investment structure, where the feeder fund collects investments from select jurisdictions and invests the proceeds into the master fund. The role of the feeder fund is to provide comfort and confidence to investors, while the master fund is the actual investment vehicle. The management and other fees are paid by the investor at the feeder fund level.
Both funds operate as separate legal entities, with the master fund being established as an offshore entity in some cases, allowing it to accept investments from different geographies of investors. This structure is particularly useful for shared investment goals where hedge funds often use it to pool investment capital and assemble a larger portfolio. The master fund can accept investments from any number of feeder funds, while a feeder fund can invest in more than one master fund. The concept works to the benefit of investment by providing flexibility in fund management and attracting investors from different jurisdictions.
4. The Reserve Bank of India (RBI) has announced a move allowing 18 nations including Mauritius to open Special Vostro Rupee Accounts (SVRAs) for payments in Indian Rupees considered as a significant move. How does such a move in the long run help foster cross-border trade, and foreign investment to make the Indian rupee global as well as benefit the retail sector in both together with the issuance of Rupai card and the Indian QR code in Mauritius?
Neha: In my opinion, the RBI’s decision to allow 18 countries including Mauritius to open Special Vostro Rupee Accounts (SVRAs) is a significant move for the entire investment industry. This step will make the Fund transfer process between the two countries far less time consuming and simpler. Previously, investors had to apply complex strategies to hedge their position of USD. However, this move will now reduce such complexities. The move to open the special Vostro account will facilitate the settlement of payments in rupees for trade between India and many other countries, thus enabling cross-border trade in the Indian currency, being an initiative that the RBI is keen to promote. Investors from both India and Mauritius can expect to benefit from this move as it eliminates the need for currency conversion and associated costs.
5. An important development meeting the eye is the setting up of an expert committee by IFSCA headed by KP Krishnan assessing the feasibility of the Variable Capital Company in India where it has already been issued in the form of regulations. Looking at the fact that Variable Capital Company (VCC) is already present across jurisdictions such as Singapore, Mauritius, and UK, what do you think would be the USP of India in setting up such an investment vehicle to help it take the lead in the financial services sector taking into account variables such as Tax Residency Certificates, legal ring-fencing of asset and liabilities under each sub-fund as well as entailing both open and close-ended sub-funds?
Neha: I believe that India’s Gift City has a unique opportunity to leverage its strengths in the financial services sector designed to attract asset managers and take the lead in this area of VCC structuring.
Compared to Singapore, which has a single TRC issued for the VCC at the umbrella entity level, India’s VCC regime from Gift City allows for separate PAN across each sub-fund, making it easier to ring-fence assets and liabilities from Tax and other liability perspective. While Singapore is still grappling with the single TRC issued at the Umbrella level, India has already taken a step forward in this regard.
The VCC structure can make India an attractive destination for asset managers looking to shift their base to Gift City, thanks to its potential to offer tax efficiency, legal ring-fencing of assets and liabilities under each sub-fund, coupled with the ability to have both open and close-ended sub-funds under one umbrella fund.
Overall, India has a unique opportunity to carve out a niche in the global financial services sector with the VCC regime, and I believe that it can help facilitate investment just as seamlessly as other jurisdictions such as Mauritius or Singapore.
6. You have had vast experience being at the helm of structuring and advising investment funds, AIFs as well as overseas fund vehicles such as across global jurisdictions and of course GIFT City trickling across compliance, legal as well as AML/CFT. Can you share your experience in advising clients in setting up overseas structures and funds as well as complexities in the current changing and regulatory environment?
Neha: In my experience in terms of advising clients on setting up investment funds, AIFs, and overseas fund vehicles such as SPVs, CIS, and PCC across global jurisdictions, there are several important factors to consider. First and foremost, it’s important to remember that choosing the right fund jurisdiction is not about “treaty shopping”. Instead, we need to consider a range of factors, including the investment instrument, substance requirements of jurisdictions, geography of the investor base, and quality of the fund admin services, among others.
Another critical factor to consider is the stability of the fund’s regulatory regime where we need to ensure that regulations are not changed overnight and on a retrospective basis, as this can cause significant disruptions to the fund and its investors. Cost of the overall sustenance of Fund is also an important consideration for some clients.
In addition, it’s crucial to take into account the AML/CFT compliance practices of the jurisdiction, as this can significantly impact the fund’s reputation and its ability to attract investors. The FATF provides a global benchmark for standardizing AML and CFT compliance practices, which is an important factor when selecting a fund jurisdiction.
Overall, my experience has taught me that careful consideration of all these factors is necessary to ensure that clients can set up successful overseas structures and funds in the current changing and regulatory environment.
7. The Indian Government has recently come up with the issuance of P-Notes and since you are involved with the GIFT City, what is your assessment of its implications for International Banking Units that were earlier unable to issue such instruments pertaining to attracting foreign investment and help India emerge as the preferred investment jurisdiction as one speaks about tax neutrality? What does this latest move mean for the future of the GIFT City posing as investment friendly?
Neha: International Banking Units can benefit greatly from this lucrative business opportunity, as distributed income from ODIs entered into with offshore banking units is proposed to be exempted from tax. Prior to its SEBI ban, P notes were a popular investment choice among foreign investors, due to their many advantages offered, such as no requirement to register with regulatory bodies, the anonymity of the end investor, and tax neutrality. Although few players offer P Notes due to the strict risk management factor associated with P Notes, the volume of these players is quite substantial. The opening up of P Note Instruments from GIFT City’s shore is expected to bring significant gains, provided that any outstanding regulatory issues are resolved.
8. An interesting development was announced recently by SEBI where the timeline for FPI licensing is expected to be slashed from the earlier 30-45 days to be foreign investment ready in securing FPI license, PAN Card, Demat, and bank account, among others. What does this imply in terms of ease of doing business in India, slashing costs for future FPIs, and helping strengthen the market set against the backdrop of uncertainties to boost investor sentiments?
Neha: The timeline has been significantly shortened, by at least 50 percent of its previous duration. This news will likely be a relief for foreign investors wanting to opt for an FPI license within a strict timeline. While cost savings may not be substantial, the reduction in time is valuable since time is money. The change in timeline will also support the Indian government’s goal of promoting ease of doing business in the country.
9. What is the future of Fund Accounting and Fund admin services from India?
Neha: It can be observed that the increasing FPI (Foreign Portfolio Investment) in India is likely to have a positive impact on the future of fund accounting and fund admin services in the country where it is expected to give impetus to growth and innovation in the sector. As more foreign investors look to invest in India, there will be a growing demand for professional services that can help them navigate the complex financial landscape of the country.
The fund accounting and fund admin industry in India is already well-established, with a number of players offering a range of services to clients both within the country and overseas.
Companies that can provide personalized services and solutions to meet the unique requirements of overseas investors are likely to succeed in the years ahead. This is precisely what we aim to accomplish at SuperNAV (www.supernav.in) with our Fund Accounting Application, a thorough investment and fund accounting solution designed for investment funds, private equity firms, venture capital, portfolio management services, Fund administrators, Pension Funds, and other similar entities.
All in all, the future of fund accounting and administration services in India appears bright, as the increasing interest from foreign investors is anticipated to fuel further progress and ingenuity in the industry.
10. You have an incredible experience spanning across the financial services industry playing a significant role in setting up numerous funds across jurisdictions. Can you share your professional journey, from humble beginnings and career peak as a professional with the readers?
Throughout my career, I have embarked on a distinct journey within the financial industry. It all began in 2007 when I started working at the prestigious Bombay Stock Exchange. Since then, I have focussed on various aspects of the Compliance and Legal field related to capital markets assuming leadership roles in renowned financial conglomerates, including those based in Mauritius.
My journey in this field has been truly transformative, particularly in establishing a wide array of investment vehicles across the globe. I have spearheaded the creation of open-ended and closed-ended funds, special purpose trusts, special purpose vehicles, investment holding companies, and protected cell companies in various jurisdictions such as Mauritius, the Cayman Islands, Bermuda, Gift City, and Indian domestic AIFs.
As I stand on the precipice of new possibilities, I am thrilled about the prospect of sharing my wealth of experience and expertise with a wider audience through SuperNAV.
