SEBI Implements Changes to Facilitate Alternative Capital, Lowers Threshold for Large Value Funds
The Securities and Exchange Board of India (SEBI) has announced a series of reforms aimed at bolstering India's alternate capital industry. This move, according to the Indian Venture and Alternate Capital Association (IVCA), is a crucial step for entrepreneurs and long-term investors.
One of the key changes introduced by SEBI is the reduction in the Large Value Funds (LVF) threshold from INR 70 crore to INR 25 crore. This reduction was a long-awaited ask, as per the IVCA. The new framework also introduces a phased glide path to shift the ecosystem from a threshold-based model to one led by investor accreditation.
Under this new framework, schemes, including LVFs and AI-only schemes, will operate without an investor cap. The AI-only schemes, in particular, will operate under a calibrated compliance regime, recognizing that accreditation is a more reliable gauge of an investor's sophistication. This move aims to enable a deeper pool of qualified investors to participate in India's growing Alternative Investment Fund (AIF) market.
Rahul Shah, Executive Vice-President of the IVCA, stated that SEBI's measures reflect a constructive and forward-looking approach to regulation. He further emphasized that the schemes will be exempted from certain requirements, such as the standardised Private Placement Memorandum (PPM) template and PPM audits, reducing administrative burden.
Investor protection standards will remain uncompromised under the new AI-only scheme/LVF classification. The previous ceiling of 1,000 investors per scheme will apply only to non-accredited investors. The schemes will also be allowed several operational flexibilities, such as relief from pari-passu obligations, a longer permissible tenure of up to five years, and the removal of the cap on the number of investors.
SEBI's measures are expected to pave the way for a more mature, globally competitive alternate capital ecosystem in India. Capitalmind Funding Pvt Ltd, in response to these reforms, appointed Rahul Shah as Executive Vice-President to support and ensure effective implementation of these changes.
The AIF industry in India has surpassed cumulative commitments of INR 13.5 lakh crore, underscoring its growing role in the country's capital formation. IVCA will continue to work closely with SEBI and other stakeholders to ensure the effective implementation of these changes, while championing a regulatory framework that fosters innovation and safeguards investor interests.
These reforms mark a significant step forward in India's alternate capital industry, providing a more conducive environment for entrepreneurs and investors alike. As we move forward, it is expected that the industry will continue to thrive, contributing significantly to India's economic growth.
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