New Delhi, Sept. 19 -- Private equity, venture capital and other alternative investment funds (AIFs) may soon need to report the net asset value (NAV) of their units to the depositories, which can then display them to the investors for greater transparency.
In a consultation paper issued on Friday, the Securities and Exchange Board of India has suggested a framework for reporting the NAV of AIF units to depositories. The NAVs would be based on the value of their investments.
According to the paper, Category I and II-which include angle funds, PE/VC vehicles, real estate and infrastructure funds-may need to engage an independent valuer to value the funds' investments to arrive at their NAV.
Category III AIFs, which include hedge funds and PIPE funds (those that make private investments in public equities), may be allowed to calculate their NAV internally provided that this exercise is isolated from its fund-management activities.
Category I and II AIFs may need to undertake the valuation of their portfolio every six months; this periodicity can be extended to every year provided 75% of their investors by value of their investment agree to that. Category III AIFs may have to do this exercise at a higher frequency, with the NAV being disclosed not later than every quarter for close-ended funds and not later than every month for open-ended ones, according to the SEBI proposal.
Once the valuation exercise is done, within 15 days, AIFs or Registrar and Transfer Agents (RTAs) may need to upload the NAV of AIF units in the depository system. The deadline would be based on the date of the valuation report when it involves an external auditor, as with Category I and Category II AIFs, and would be based on the date on which the valuation is documented in internal records of the fund for Category III.
Existing schemes would need to comply within 45 days once and if the circular, as detailed in the draft given in the consultation paper, comes into effect.
The draft circular also says that the depositories will need to provide the necessary infrastructure to operationalise this.
Public comments and suggestions on the proposals in the paper need to be sent in by October 9, SEBI said.
Published by HT Digital Content Services with permission from VC Circle.