Sebi wants alternative investment funds raising money to hire investment banks

Siddharth Shah, sugata ghosh & reena, khaitan, Securities & Exchange Board, sebi

The Securities & Exchange Board of India (Sebi) wants all private equity (PE) and venture capital (VC) funds raising money to hire investment banks – a proposal that fund houses are trying to push back.

The regulator wants a third-party intermediary, governed by rules of the capital market, to verify information in a fund’s ‘private placement memorandum.’ PPM is the key document prospective investors skim through before putting money in alternative investment funds (AIFs) – the regulatory term for PE and VC funds.

The stand taken by Sebi follows large funds, running multiple schemes with thousands of crores of assets under management (AUM), submitting PPMs that are incomplete and often in violation of regulations.

The issue was discussed and the lapses in applications by several AIFs were shared by Sebi officials this month with the Alternative Investment Policy Advisory Committee, headed by NR Narayana Murthy, two persons aware of the development told ET.

Faster approvals

“For instance, one of the PPMs by a large fund said it would make temporary investments in instruments issued by entities in OECD countries,” said a person present in the meeting. “Another said it would give loans and guarantees, while (yet) another said it would allow indirect co-investments and extend the tenure of funds with the consent of the advisory committee. None of these are allowed under regulations… These applications did not come from small funds or newbies.”

One of the PPMs talked about giving special rights to a select class of investors to extend the commitment period (during which a fund is allowed to call in capital from investors for making new investments).

There are around 700 AIFs in India with more than Rs 4.5 lakh crore committed by investors.

Sebi thinks that the presence of a merchant banker would help in reducing irregularities in PPM and quicken clearance of applications. But the regulator will have to dispel the fears that AIFs harbour.

Siddharth Shah, sugata ghosh & reena, khaitan, Securities & Exchange Board, sebi

Flip side

“An AIF is far more bespoke a product, and expecting a merchant banker to oversee the fund documents is premised on the fact that they are expected to understand the nuance of the product as well as the fund entity itself, which may not be true,” said Siddharth Shah, senior partner at law firm


& Co. “Second, involving an intermediary will add to the cost of fundraising, which is already high in India compared to many other markets, besides adding to the complexity of the process. Lastly, forcing an involvement of a merchant banker and making them powerful could hamper product innovation as the intermediaries start dictating product offerings.”

While AIFs should not lose their flexibility, Sebi, said a person aware of the discussions, is firm that there has to be a set of minimum set of disclosures for investors. “It was pointed out that in some applications, the illustration of the ‘waterfall’ was missing. One of the PPMs did not make disclosures on ‘related party’ and ‘warehousing’ transactions,” said the person.

A ‘waterfall’ lays down how the fund would distribute capital to various investors as it books profits by selling underlying investments. “Many of the violations were by large funds – such as 74 schemes and AUM of Rs 20,000 crore, 20 schemes managing Rs 14,000 crore, four schemes with Rs 7,000 crore, etc,” he said.

Sebi’s recent move is unrelated to previous measures such as introducing a standardised PPM template and mandatory performance benchmarking by AIFs. According to Sebi officials, it is aimed at faster turnaround of approvals, said the person. Sebi is understood to be receiving 20-25 applications for fundraising from AIFs every month.

News Related


Biggest gainers & losers of the day: Metal stocks bleed; HLE Glasscoat shines 20%

New Delhi: Domestic equity markets marched along the global sell-off on Monday and settled lower amid the Evergrande crisis in China. Metal stocks were largely under pressure, whereas FMCG shares ... Read more »

Won't let you start any other project till you complete Mumbai-Goa highway work, HC tells Maharashtra govt

Questioning the slow pace of lane widening of Mumbai-Goa highway, the Bombay High Court on Monday directed the Maharashtra government to review the ongoing construction work by December and complete ... Read more »

PNB earns Rs 170 crore in FY21 by levying charges on non-maintenance of minimum balance

State-owned Punjab National Bank (PNB) collected nearly Rs 170 crore by levying charges on customers for not maintaining the required minimum balance in their accounts during 2020-21, according to RTI ... Read more »

It's time for a new tax on the UK's wealthiest 1% – arguments against it don't add up

As the government raises taxes on working people and plans the biggest benefit cut in the history of the welfare state, many are calling for rich people to pay their ... Read more »

How much you should be saving in your 20s, 30s and 40s for your retirement

For people just starting out in their twenties, individuals have a lot of time to save, which is a benefit. Moneybox explained the power of compounding and how over time ... Read more »

After Tesla, now Mercedes-Benz calls for reduced import duty on cars

German luxury carmaker Mercedes-Benz Mercedes-Benz has supported rival Tesla‘s call for reducing taxes on imported cars in India. Calling the import duty “outrageous”, Mercedes said customers in India could end ... Read more »

F&O: Nifty negates higher highs & lows in signs of bearishness

Nifty50 on Monday opened gap down due to dampened global cues, but managed to recover above the 17,600 level in the initial hour. However, weakness swept across once again and ... Read more »

Tech View: Nifty sends out sell signal on MACD; it's a 'sell of rise' market

NEW DELHI: Nifty50 on Monday took a beating, falling below the 17,400 mark, far off its immediate support at 17,500, to send out weak signals. The fact that the index ... Read more »

Politics latest news: Government eyes taxpayer-funded loans amid crunch talks on energy crisis

© Reuters Kwasi Kwarteng, the Business Secretary, will be meeting with energy bosses as crunch talks continue – Reuters Johnson to tell Biden: ‘Lift travel ban and let Britons back ... Read more »

7.5% quota: Govt to bear expenses of students joining professional courses, says Tamil Nadu CM MK Stalin

Tamil Nadu Chief Minister MK Stalin (Illustration: Moneycontrol) The Tamil Nadu government will bear the tuition fees among others of students enrolling in professional courses in the State under the ... Read more »

India to resume export of surplus COVID-19 vaccines next month: Mansukh Mandaviya

India will resume export of surplus COVID-19 vaccines next month under the ‘Vaccine Maitri’ programme and to meet its commitment to the COVAX global pool, but vaccinating its own citizens ... Read more »

Russia university shootout: Indian students safe, Embassy in touch with authorities

All Indian students are safe and Indian Embassy in Moscow is in touch with authorities following a shootout that killed at least eight people at a university in the Russian ... Read more »

India concerned about implications of changes in Afghanistan, says Foreign Secretary Shringla

As a neighbour of Afghanistan, India is naturally concerned about the recent changes in that country and their implications for the region, Foreign Secretary Harsh Vardhan Shringla said on Monday. ... Read more »

WheelsEMI to raise $35-40 million, to enter into used two-wheeler market with Bike Bazaar

WheelsEMI Ltd is set to raise $35-40 million of C Series funding to expand its business and revamp itself from just financer of used two wheelers to end to end ... Read more »

Kanhaiya Kumar, Jignesh Mevani to join Congress on October 2: Report

Communist Party of India (CPI) leader Kanhaiya Kumar and independent Gujarat MLA Jignesh Mevani are set to join the Congress on October 2, a report said on September 20. Mevani, ... Read more »

Monday Mayhem! Investors lose Rs 3.78 lakh cr as Sensex plunges 525 pts; Nifty settles below 17,400

NEW DELHI: Domestic benchmark indices gave in to the global sell-off on Monday and dived amid a drop in commodity prices and the Evergrande crisis in China. The metal block ... Read more »

Expo 2020 Will Set Up A Tough Benchmark To Future Global Shows

As curtains go up in Dubai for the much-awaited Expo 2020 in a few days, the mega event, indisputably, would set a new model and benchmark for other global events ... Read more »

Racist, offensive: Jairam Ramesh, Shashi Tharoor slam Britain's COVID-19 travel rules

New Delhi, Former Union ministers Jairam Ramesh and Shashi Tharoor on Monday slammed the UK’s COVID-19-related travel rules under which Indians vaccinated with Covishield would still be treated as unvaccinated, ... Read more »

Gujarat CM Bhupendra Patel to meet President Kovind, PM Modi in Delhi today

Gujarat Chief Minister Bhupendra Patel is scheduled to meet President Ram Nath Kovind, Vice President M Venkaiah Naidu and Prime Minister Narendra Modi on Monday in New Delhi, said Chief ... Read more »

If the hottest business is not generating cash flow, avoid it: Saurabh Mukherjea

The Indian economy is at an inflection point and analysts say the texture of the stock market is likely to change over the next 10 years with new compounders driving ... Read more »

SC notice to Centre on plea for door-to-door COVID-19 vaccination for disabled persons

The Supreme Court on Monday sought a response from the Central government on a PIL seeking priority for COVID-19 vaccination for persons with disabilities at their place of residence since ... Read more »

Australia shares post worst session in 7 months on weaker commodity prices

Australian shares fell more than 2% on Monday in their worst session in nearly seven months, as weak commodity prices hammered mining and energy stocks, while AusNet Services soared after ... Read more »

German shares slump 2%, European index hits two-month lows

European shares fell to a near two-month low on Monday and Germany’s benchmark index sank 2%, as investors feared major central banks would start giving cues about tapering their pandemic-era ... Read more »

Dow futures fall over 1% on growth worries, focus turns to Fed

US stock index futures fell 1% on Monday, as investors worried about rising COVID-19 cases and the pace of economic growth at the start of a week in which the ... Read more »

Dire warning for Biden as the US risks running out of cash 'within weeks'

Joe Biden‘s trillion dollar spending boost will be used to pay for infrastructure, childcare, education, healthcare and the fight against climate change, and the changes are likely to offer more ... Read more »

Universal Credit warning as people could see payment cancelled over pension error

Universal Credit is designed to help individuals who are out of work or unable to work. However, it also provides vital support for those who are working but currently on ... Read more »

NEET-SS exam: SC issues notice to Centre, National Medical Council on plea against ‘last minute' changes

The Supreme Court on September 20 issued notice to the Centre and the National Medical Council on a plea by post-graduate doctors alleging last- minute changes in the National Eligibility ... Read more »

Every rupee in my foundation awaiting its turn to save a life: Sonu Sood

Source: Instagram/Sonu Sood Every rupee in his foundation is “awaiting its turn” to be used to reach the needy and save precious lives, actor Sonu Sood said in a statement ... Read more »

New record: Norwegians spent 58 billion kroner on online shopping in the second quarter of 2021

In the second quarter of 2021, Norwegians spent almost NOK 60 billion on online shopping. That is a new record – it’s 41% more than in the same period last ... Read more »

‘Only temporary!' Boris abates fears UK will be hit by meat shortages as gas prices surge

The Prime Minister blamed the resurgence of the global economy as Covid starts to retreat for rocketing demand. Speaking on his way to a three-day visit to the United States, ... Read more »

Evergrande effect: Chinese property developer Sinic shares tank 87%, trading halted

NEW DELHI: Trading was halted in shares of Chinese realtor Sinic Holdings on Monday after its shares crashed 87 per cent in Hong Kong. This is on a day when ... Read more »

NHAI pays firm Rs 4.5 cr, after holding back Rs 20L bill for 9 yrs

The NHAI ended up paying Rs 4.5 crore to a private firm after it held back on clearing their bills for Rs 20 lakh about nine years back, a TOI ... Read more »

Guidelines issued regarding Navratri, Dussehra and Chehallum in Uttar Pradesh

Uttar Pradesh has issued guidelines to maintain law and order and communal harmony in view of Shardiya Navratri, Vijayadashami, Dussehra, and Chehallum. On the occasion of these festivals, Chief Minister ... Read more »

Evergrande gave workers a choice: Loan us cash or lose your bonus

When the troubled Chinese property giant Evergrande was starved for cash earlier this year, it turned to its own employees with a strong-arm pitch: Those who wanted to keep their ... Read more »

HDFC Bank inks pact with Paytm to ramp up credit card issuance

Looking to regain lost ground in the credit cards segment, HDFC Bank on Monday announced a tie-up with leading payments company Paytm to start selling co-branded plastics before the onset ... Read more »

Newly sworn-in Punjab CM Charanjit Singh Channi appeals Centre to repeal farm laws

Charanjit Singh Channi Newly sworn-in Punjab Chief Minister Charanjit Singh Channi on Monday urged the Centre to repeal agri laws, and said his party stands firmly behind farmers agitating against ... Read more »

Javed Akhtar defamation case: Kangana Ranaut appears before Mumbai magistrate court, says she has lost faith in it

Bollywood actor Kangana Ranaut appeared before a Mumbai court on Monday in connection with a criminal defamation complaint filed against her by lyricist Javed Akhtar, and said she had “lost ... Read more »

Evergrande explained: One-off crisis or China's version of Lehman Bros?

MUMBAI: Though the global equity market has decided today that it wants to acknowledge the existence of a crumbling real estate giant in one of the largest property markets in ... Read more »

China to Wall Street: Regulatory crackdown not aimed at restricting private firms

BEIJING/HONG KONG: China’s sweeping regulatory crackdown of recent months does not aim to rein in the country’s private enterprises or decouple from the United States or international financial markets, a ... Read more »