In a bid to offer operational flexibility and enable ease of doing business for Alternative investment funds (AIFs), SEBI has issued new guidelines for its Categories I and II as per a report by Inc42.
SEBI's guidelines aim to streamline AIFs operations which can bolster funding for local start-ups by trickle down effect
In a bid to offer operational flexibility and enable ease of doing business for Alternative investment funds (AIFs), SEBI has issued new guidelines for its Categories I and II as per a report by Inc42.
Reportedly, the new guidelines are expected to have an impact on Indian start-ups as Venture Capital firms primarily float AIFs to invest in new-age tech companies. SEBI's guidelines aim to streamline AIFs operations which can bolster funding for local start-ups by trickle down effect.
Under the new guidelines, the AIF can get loans to meet temporary funding needs and day-to-day operational requirements for a period of up to 30 days. It will be required to maintain a 30 day cooling period between two periods of borrowing.
It limits the number of times that AIFs can borrow in a year to four and up to 10 per cent of its total investible funds. It has capped borrowings to 10 per cent of investible funds, or 20 per cent of drawdown value, which is the amount called from investors for making in investee companies.
The maximum permissible limit for extension of tenure for large value funds (LVFs) could extend up to five years subject to the approval of two-thirds of the unit holders (by value).
SEBI has said the AIFs should disclose the information about leveraging to the investors.
The managers of AIF should reveal the details with respect to the amount borrowed, terms of borrowing and repayment to all the investors of the scheme on a periodic basis.
Alternative investment funds are a type of collective investing that involves raising funds from multiple investors and investing them according to a predetermined investment strategy.
AIFs are different from traditional mutual funds and stocks, and they can be a growing asset class in India. It includes three categories - I, II and III.
Category I funds include venture capital SME funds.
Category II funds consists of real estate funds, private equity funds and funds for distressed assets.
Category III encompasses funds which use complex investment strategies in listed and unlisted derivatives.