Private equity and venture capital funds holding money of five or fewer investors have drawn the focus of capital market regulator SEBI, reported The Economic Times.
In an email on September 12, the Sebi has asked for information on funds formed with a small club of investors, two senior industry persons said.
This comes a week after it asked PE and VC funds about their valuation practices.
These funds have to give details of investors in a scheme: name of the investors; whether it’s an individual, company, limited liability partnership, or trust; the country of the investor; the amount it has committed and the quantum of fund raised.
They have to also submit the name of the investee company, its country of origin, nature of business, and the instrument issued (equity, debt, convertible etc) to raise money.
The details have to be provided for every scheme of an alternative investment fund (AIF) — the regulatory term for PE, VC and angel funds. Besides, the name of a contact person in every fund along with the mobile number has to be shared with Sebi.
“Usually, funds with less than five contributors (excluding the sponsor and the manager) are captive in nature. We have seen many family offices, large investors, and corporates using AIFs to hold stakes in companies. Probably, they don’t want to reveal their identities,” said a person with a fund trustee, reported ET.