SEBI proposes lower entry threshold for large-value AIFs at Rs 25 Cr

Markets regulator SEBI has proposed a slew of relaxations for large value funds (LVFs) under the alternative investment funds framework, including a reduction in the minimum investment requirement to Rs 25 crore from the current Rs 70 crore.

In a consultation paper issued on Friday, the regulator said the changes aim to widen investor participation and cut compliance costs.

The proposals follow recommendations from SEBI's Alternative Investment Policy Advisory Committee and the Ease of Doing Business Working Group.

The key proposal is to lower the investment threshold to Rs 25 crore, which the regulator said will attract more domestic institutional players such as insurance companies and diversify the investor base.

At present, the working groups highlighted that the LVF threshold of Rs 70 crore is too high, and many investors, including some institutional investors, have limitations on the quantum.

SEBI has also proposed exempting LVFs from several compliance requirements, including the need to follow the standard template for private placement memoranda (PPM), mandatory annual audits of PPM terms, and the responsibility placed on investment committee members for approving fund decisions.

The NISM certification mandate for key investment team members of fund managers may also be waived for LVF-only schemes.

Further, the regulator has proposed removing the cap of 1,000 investors per AIF scheme for LVFs, citing the large ticket size and the accredited investor base as sufficient safeguards.

SEBI also recommended allowing existing AIF schemes, whose investors meet LVF criteria, to convert into LVFs with the consent of all investors. This would enable them to benefit from the proposed relaxations.

The markets watchdog noted that LVFs have seen steady traction since their introduction in August 2021, but could play a bigger role in channelling long-term investments, especially into unlisted securities, if entry barriers are lowered.

The Securities and Exchange Board of India has invited public comments on the proposals till August 29.