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Demystifying SEBI’s Rules For Co-Investment Vehicles: Will It Impact Startup Funding?
- SEBI released a consultation paper proposing reforms to streamline co-investment strategies in India's PE/VC sector through Co-Investment Vehicles (CIVs) within AIF framework.
- SEBI suggests allowing AIF managers to offer advisory services in listed securities to enhance guidance on public stocks.
- The proposed CIV model will create independent schemes under AIF for co-investment deals, improving operational efficiency.
- SEBI's focus on PE/VC funding post-geopolitical challenges led to a 9% YoY rise in investments in 2024, primarily in venture capital and growth funding.
- Stakeholders appreciate SEBI's initiative for reducing compliance overheads and enhancing operational flexibility.
- Concerns exist regarding CIV framework, including restrictions on co-investors, potential for double taxation, and limitations on new investor participation.
- Managing partner of Eximius Ventures, Pearl Agarwal, highlighted challenges like exit restrictions and potential for double taxation with the proposed CIV framework.
- Deepak Padaki from Catamaran Ventures noted that the CIV model may not align with certain LPs and expressed concerns about restricted flexibility for investments.
- SEBI seeking public feedback on the CIV model to address concerns and ensure alignment with investor needs and industry dynamics.
- SEBI rejected in-fund co-investments to maintain AIF's pooled structure integrity and transparency, opting for CIVs within the AIF framework.
- The rise in demand for CIVs stems from limitations in the current co-investment system, with recommendations for restructuring under AIF regulations.
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