SEBI Plans To Increase AIFs Minimum Ticket Size To INR 5 Cr

SUMMARY

An upsurge in disposable incomes and the number of HNIs entering the alternative investment space recently have contributed to this move

The development comes three months after private equity and venture capital funds approached SEBI urging to relax co-investments norms in alternative investments space

In August, the regulatory body was mulling to increase the lifecycle of near-end AIFs by two more years, increasing the cycle to 14 years

Stock exchange regulatory body Securities and Exchange Board of India (SEBI) is reportedly planning to increase the minimum ticket size for Alternate Investment Funds (AIFs) to INR 5 Cr against the existing threshold of INR 1 Cr.

According to the Financial Express report citing sources, the move will be taken seeing an upsurge in disposable incomes and the number of HNIs (high-net-worth individuals) entering the alternative investment space recently.

The development comes three months after private equity and venture capital funds approached SEBI seeking to relax co-investments norms in alternative investments space.

The PE and VC funds requested the regulatory body to allow investors, which have infused in AIFs, to hold onto their investments despite AIFs exiting or selling off stakes in that particular company.

It is prudent to note that SEBI has begun close monitoring of the alternate investment space. In August, the regulatory body was reportedly mulling to increase the lifecycle of near-end AIFs by two more years. With this, the entire lifecycle of AIFS will be increased to 14 years subject to conditions.

At present, AIFs have a lifecycle of 3-10 years and are granted extensions on a case-to-case basis.

During the same month, the body removed a clause from its guidelines that hindered AIFs and Venture capital funds while investing abroad. The clause, which has been taken down, asked AIFs and VC funds to invest in a foreign company that has an Indian connection.

Meanwhile, in June, the body asked large value funds (LVFs), also known as AIFs, to submit documents signed and stamped by AIF’s CEO and compliance officers while applying for LVF schemes.

Back in 2021, the regulatory body introduced LVFs for investors having higher risk appetite and ability to infuse a minimum of INR 70 Cr in the fund.

In July, the body had made surprise inspections on the premises of over 20 AIFs including PE funds and hedge funds, among others. The inspections were mainly done to check if the AIFs were adhering to regulations.

According to SEBI’s data, as of June 2022, AIF investments have soared by 42% year-on-year (YoY) to INR 6.94 Tn. Besides that, the amount infused in AIFs has plunged upward by 43% to INR 3.1 Tn and also, the count of AIFs operating in India set to breach the 1000 mark.