SEBI Asks PE, VC Funds To Disclose Their Startup Valuation Process

As per reports, this move shows that the market regulator wants to understand the credibility of the valuation exercise undertaken by funds

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The Securities and Exchange Board of India (SEBI), has asked a large number of funds to disclose their startup valuation procedures, any significant change in the valuation methodology in the past three years, qualification of the valuer, if the valuer hired is an associate of the fund or its manager or sponsor among other things, as per reported by ET, stating some close sources.

SEBI Twitter handle

Two persons aware of the matter, as per quoted by ET said that, "This move shows that the market regulator wants to understand the credibility of the valuation exercise undertaken by funds. While the regulator is trying to get a sense on the performance of the alternative investment fund (AIFs), it may also wish to understand the valuation practices prevalent in the industry as the same may vary across funds in absence of any regulatory prescription."

As per SEBI directive, the funds have to also share the date of latest valuation, cost of cumulative investments made, latest valuation of investment portfolio, whether the valuation exercise is based on audited or unaudited data of the investee companies, details of valuation methodology and if there were any deviations from the said methodology and whether the scheme has a valuation committee.

According to reports, a year ago, SEBI had said that AIFs must have independent trustees having no connection with the sponsor and managers of the funds. A few months ago, at a meeting of the alternative investment policy advisory committee, Sebi officials had put forward that the schemes PE and VC funds should be ring-fenced from each other so that any stress and liabilities in one pool of money do not spill over into another.