AIF Valuation in India: SEBI’s Standardised Approach, Policy Framework

Valuing a portfolio of unlisted securities, structured credit instruments, and early-stage equity positions has never been a uniform exercise. Before June 2023, fund managers in India had wide discretion over which methodology to apply, how often to apply it, and what to disclose. Two funds with identical portfolios could report materially different net asset values and both be technically compliant. That changed when the Securities and Exchange Board of India (SEBI) issued Circular No. SEBI/HO/AFD/PoD/CIR/2023/97, mandating a standardised approach to valuation of investment portfolios of Alternative Investment Funds (AIFs). A series of amendments and a depository reporting mandate followed through 2024 and 2026. This article sets out the complete framework as it stands today, what it demands of fund managers, and where the compliance gaps are most likely to surface.

Why SEBI standardised AIF valuation, and why it took until 2023

Before the June 2023 circular, the SEBI (Alternative Investment Funds) Regulations, 2012 addressed valuation primarily through disclosure obligations rather than methodology mandates. Regulation 23(1) required Category I and II AIFs to value investments through an independent valuer at intervals no longer than six months. Regulation 23(3) required Category III AIFs to calculate NAV independently of the fund management function and disclose it at quarterly intervals for close-ended funds and monthly for open-ended ones. Regulation 27(1)(b) required managers to maintain records describing valuation policies and practices.

What the regulations did not do was specify how valuations should be conducted. The Private Placement Memorandum (PPM) template issued by SEBI in February 2020 asked Category I and II AIFs to disclose whether they followed the International Private Equity and Venture Capital (IPEV) Guidelines or some other guiding principle. That was a disclosure prompt, not a mandate. Fund managers could, and many did, adopt bespoke frameworks that were not auditable against any external standard.

SEBI’s January 2023 consultation paper identified three specific problems this created. First, fair disclosure to investors was undermined because there was no common benchmark against which a unit holder could assess whether the NAV they received was reasonable. Second, performance comparisons across AIFs were unreliable because identical assets could carry different valuations depending on which fund held them. Third, SEBI’s own regulatory oversight was constrained because it had no standardised data set to detect irregularities or monitor systemic risk across the ₹15.74 lakh crore AIF industry.

The June 2023 circular addressed all three by mandating specific methodologies for the first time.

How the two-track valuation system works

The framework SEBI adopted draws a clear line between two asset classes and applies different methodology sets to each. Understanding why this line was drawn where it was helps fund managers apply the rules correctly rather than mechanically.

Track 1: Listed securities governed by MF Regulations

For securities for which valuation norms are already prescribed under the SEBI (Mutual Funds) Regulations, 1996 (MF Regulations), the AIF must carry out valuation in accordance with those norms. This covers liquid, exchange-traded securities where market prices are observable and reliable. The logic is straightforward: if a price exists in the market, use it. Mark-to-market pricing eliminates subjectivity for this category.

Track 2: Unlisted and other securities governed by IPEV Guidelines

For all other securities (unlisted equity, structured debt, thinly traded instruments, convertible instruments below investment grade), the framework requires adherence to the International Private Equity and Venture Capital Valuation Guidelines (IPEV Guidelines), specifically the December 2022 edition, as endorsed by IVCA (Indian Venture and Alternate Capital Association), which qualifies as an eligible AIF industry association under Clause 22.1.2 of the SEBI AIF Master Circular (May 2024) because it represents at least 33% of SEBI-registered AIFs by membership count.

The reason SEBI landed on IPEV for unlisted instruments, rather than simply extending the MF Regulations framework across the board, is rooted in a fundamental difference between how mutual funds and AIFs hold their investments. A mutual fund typically holds its investments on an “available for sale” (AFS) basis. It may exit positions quickly and needs market-consistent pricing at all times. An AIF typically holds on a “hold to maturity” (HTM) basis with a defined investment horizon. Applying AFS-oriented mark-to-market norms to an HTM portfolio creates artificial volatility in reported NAV that does not reflect the fund’s underlying investment thesis. The IPEV Guidelines were designed for exactly this holding pattern.

IPEV valuation techniques

The IPEV Guidelines (December 2022) specify that the valuer should use one or more of the following techniques at each measurement date, selecting whichever best reflects the fair value of the instrument given the nature of the investee company, its stage of development, and the instrument held:

Technique	Best suited for	Key inputs
Price of recent investment	Early-stage / seed rounds	Last transaction price, calibrated for time elapsed
Earnings multiple (EV/EBITDA, P/E)	Growth-stage, profitable or near-profitable	Comparable listed/private multiples, EBITDA, revenue
Revenue multiple	SaaS, high-growth pre-profit companies	ARR, NRR, churn, comparable market multiples
Discounted cash flow (DCF)	Late-stage, asset-heavy, predictable cash flows	WACC, terminal growth rate, free cash flow projections
Discounted cash flow (VC method)	Early-stage with exit assumptions	Terminal value, expected IRR, probability of exit
Net assets / liquidation value	Asset-heavy, distressed, real estate	Adjusted book value, realisation assumptions
Industry valuation benchmarks	Sector-specific (real estate, infrastructure)	Sector-specific metrics, comparable transactions

A single investment may warrant two or more techniques applied in parallel, with the valuer exercising judgment on their relative weight. The IPEV Guidelines require that the technique selected be applied consistently from period to period; if the valuer changes techniques, the rationale must be documented and disclosed.

What does the IPEV 2025 update mean for Indian AIF managers?

This is the dimension of the valuation framework that no competitor article has addressed, and it is live now. The IPEV Board published a new edition of its guidelines in December 2025, which supersedes the December 2022 edition. The 2025 guidelines are considered in effect for quarterly reporting periods beginning on or after 1 April 2026, that is, FY 2026-27 onwards, with early adoption encouraged.

SEBI’s AIF Master Circular endorses the IPEV Guidelines as the standard for valuing unlisted and thinly traded securities, but does not pin the mandate to any specific edition. The endorsement runs to “the IPEV Guidelines” as a living framework. Indian AIF managers and their appointed valuers are therefore expected to operate under the 2025 edition for all valuation reports prepared for periods from 1 April 2026.

The 2025 update preserves the established fair value framework and core techniques. It does not change the fundamental approach. What it adds is material clarification in areas that have been sources of dispute between fund managers, valuers, auditors, and LPs in practice:

Calibration: tightened expectations. Calibration (the process of aligning valuation model inputs at entry so that the chosen technique reconciles to the transaction price) was already a core IPEV concept. The 2025 edition expands guidance on how calibration should be maintained at subsequent measurement dates: the valuer must roll forward from calibrated inputs and update only assumptions that have genuinely changed due to company performance, market conditions, or new information. LP advisory committees and statutory auditors in India now have clearer grounds to challenge a valuation where calibration is absent or poorly documented.

Complex capital structures: dedicated new section. Convertible instruments, liquidation preferences, and hybrid instruments have become common in Indian VC and PE rounds. The 2022 edition gave limited guidance on how to handle these in fair value estimation. The 2025 edition introduces a dedicated section on complex capital structures, providing specific direction on when option-pricing models, scenario-based approaches, or hybrid techniques are more appropriate than simpler earnings or revenue multiples. For Indian Category II funds with convertible note or CCPS-heavy portfolios, this is directly relevant.

Hybrid instruments: new dedicated section. Instruments that carry both debt and equity characteristics are now addressed separately. This matters for Indian private credit funds (Category II) holding structured instruments that include equity kickers, warrants, or conversion rights. The guidance requires the valuer to assess whether the instrument is best valued as a whole or decomposed into its debt and equity components.

Artificial intelligence in valuation: explicit guidance. The 2025 edition states plainly that AI tools can augment the valuation process but cannot replace professional judgment. A valuation model that produces outputs from an AI or large language model without human challenge and oversight is not compliant with the guidelines. The valuer remains fully accountable for all inputs, processes, outcomes, and conclusions, including any AI-generated outputs. Fund managers who have been experimenting with AI-assisted valuation models should note this as a documentation and accountability requirement, not just a technology governance comment.

Secondary transactions: expanded discount guidance. Discounts and premia in secondary transactions, where there is often an opaque or thin market for AIF units or portfolio stakes, now receive clearer treatment. Given that the Indian secondary market for AIF interests is growing, this is relevant for both fund-level secondary sales and portfolio company stake transfers.

Valuation frequency: more frequent marks for certain structures. The 2025 edition explicitly notes that a quarterly valuation process may not be sufficient for all structures and investor needs, particularly for evergreen or open-ended structures with more frequent subscriptions or redemptions. For Indian Category III open-ended funds, which already operate under a monthly NAV disclosure requirement, this is directionally aligned. For Category I or II funds contemplating semi-annual valuation as the floor, the 2025 guidance reinforces why institutional LPs increasingly push for quarterly marks.

Does SEBI need to specifically adopt the 2025 edition?

This is a legitimate question for fund managers. SEBI’s Master Circular mandates valuation per “guidelines endorsed by an eligible AIF industry association.” IVCA, as India’s Country Partner for IPEV, has endorsed the IPEV Guidelines framework. IVCA’s endorsement was not edition-specific in the sense of being locked to December 2022. As the authoritative body recognised by SEBI for this purpose, IVCA’s adoption of the 2025 edition, which has already occurred at the international level, effectively brings Indian AIFs under its scope for FY 2026-27.

Fund managers should confirm with their appointed valuers that valuation reports for the first quarter of FY 2026-27 (April to June 2026) reference the December 2025 IPEV edition where relevant, particularly for portfolios with complex capital structures, hybrid instruments, or significant secondary activity. The PPM’s valuation methodology section may also warrant a brief update to reflect the current edition, even if no substantive change in technique is being made. The disclosure obligation under Regulation 27(1)(b) covers valuation policies and the version of guidelines being applied.

What does “independent valuer” mean under SEBI’s framework?

This is where more fund managers run into compliance gaps than anywhere else in the valuation framework. The requirement for an independent valuer is not new, Regulation 23(1) of the AIF Regulations 2012 has required Category I and II AIFs to value investments through an independent valuer at semi-annual intervals since the regulations came into force. What was unclear until the September 2024 circular was who qualifies.

What changed with SEBI’s September 2024 valuation framework modification

SEBI Circular No. SEBI/HO/AFD/PoD-1/P/CIR/2024/123 dated 19 September 2024 updated the eligibility criteria for independent valuers and addressed the practical confusion the industry had raised about entity-level valuers. The prior framework required the independent valuer to be registered with the Insolvency and Bankruptcy Board of India (IBBI) and to hold membership of ICAI, ICSI, ICMAI, or the CFA Institute. This formulation was easy to apply to individual valuers but created ambiguity for valuation firms.

The September 2024 circular resolved this by distinguishing between individual valuers and entity-level valuers:

For an individual acting as independent valuer, the requirement remains: IBBI registration plus ICAI, ICSI, ICMAI, or CFA membership.

For a partnership or company acting as independent valuer, the entity itself must be a “Registered Valuer Entity” registered with IBBI. The individual(s) deputed or authorised by that entity to actually conduct the AIF portfolio valuation must each hold membership of ICAI, ICSI, ICMAI, or the CFA Institute. The entity does not need every partner or director to hold these memberships. Only those actively conducting the valuation work must qualify.

An additional eligibility pathway is available: a holding company or subsidiary of a Credit Rating Agency registered with SEBI also qualifies as an independent valuer. SEBI retains the right to prescribe additional eligibility criteria by notification.

The independence requirement is substantive, not formal. The valuer must have no conflict of interest with the AIF manager, the sponsor, or the investee companies. The practical test: can the valuer’s report and the inputs used withstand external scrutiny without the fund manager having shaped the outcome?

Table: Valuer eligibility by entity type

Valuer type	IBBI registration required	Professional membership required	At entity or individual level?
Individual	Yes (individual registered valuer)	ICAI / ICSI / ICMAI / CFA	Individual
Partnership or company	Yes (Registered Valuer Entity)	ICAI / ICSI / ICMAI / CFA	Deputed / authorised person only
CRA holding/subsidiary	Not separately required	Not separately required	Entity level
Fund manager’s own team	Not permitted	Not applicable	Not applicable (not independent)

What are the valuation frequency requirements by AIF category?

Regulation 23 of the SEBI (Alternative Investment Funds) Regulations, 2012 and Chapter 22 of the AIF Master Circular (May 2024) specify minimum frequency requirements. These are floors, not ceilings. Fund managers who value more frequently, as many Category II PE funds do quarterly, are compliant.

Category I and II AIFs (Regulation 23(2)): Investments must be valued at intervals not longer than six months. Independent valuation by an eligible valuer is required. The SEBI Master Circular (June 2026) confirmed this minimum as semi-annual but noted that best practice for most institutional-quality Category II funds is quarterly valuation. For LP reporting purposes, most LPA structures in the Indian market require quarterly valuation to support carry calculations and investor statements.

Category III AIFs (Regulation 23(3)): NAV must be calculated independently from the fund management function and disclosed to investors at intervals not longer than a quarter for close-ended funds and monthly for open-ended funds. For Category III funds investing in unlisted securities, independent valuation of those unlisted positions is now required under the Master Circular framework, even though the core NAV calculation responsibility historically sat with the fund’s internal operations or administrator.

The semi-annual requirement for Category I and II is the regulatory minimum. Fund managers who offer quarterly reporting to investors in their PPM are contractually bound to that frequency regardless of the regulatory floor.

If your AIF’s PPM commits to quarterly valuations and your fund is currently valuing semi-annually citing regulatory sufficiency, you have a PPM compliance gap. Not just a best-practice gap. The AAR now requires disclosure of valuation methodology and frequency, and any mismatch between PPM commitments and actual practice gets flagged during the PPM compliance audit. Read Treelife’s guide to AIF structure and documentation to understand how valuation obligations flow through the trust deed and PPM.

The February 2026 NAV depository reporting mandate

The most recent significant change to the AIF valuation compliance landscape came through SEBI Circular No. HO/19/34/11(8)2025-AFD-POD1/I/4335/2026 dated 06 February 2026. This circular directs all AIFs to report the unit value, that is, the NAV of each scheme’s units, to depositories (NSDL and CDSL) through their Registrar and Transfer Agents (RTAs).

The rationale is operational efficiency and investor accessibility. With AIF units now mandatorily held in dematerialised form (Regulation 10(aa), SEBI AIF Regulations 2012, as amended; all new investments from 01 July 2025 in dematerialised form), the depository infrastructure is already the single point of record for unit holdings. Routing NAV data through the same infrastructure gives investors a consistent, centralised view of the value of their units without having to wait for quarterly investor statements from the fund.

Key operational requirements under the February 2026 circular:

• AIFs must upload the most recent NAV for each ISIN to the depository system before 01 May 2026 (the initial upload deadline), or within 30 days of each portfolio valuation date thereafter, whichever is later.
• Where valuation is carried out by an independent valuer, the valuation report date is the relevant reference date for calculating the 30-day upload window.
• Where internal valuation is used (Category III NAV calculation), the date the valuation is formally recorded in internal systems applies.
• AIF managers bear accountability for the accuracy and timeliness of NAV uploads. Trustees or sponsors must confirm compliance with this requirement in their Compliance Test Reports.
• Depositories are required to display a standard disclaimer: “Net Asset Value (NAV) being shown is on the basis of valuation methodology and accounting practice followed by your respective AIF. Please refer to your fund documents for more details.”

This is a structural shift. Historically, AIF NAV information was visible only to unit holders through fund-issued statements. Depository-level reporting means the information is now part of a regulated data infrastructure, subject to depository audit and reconciliation processes. Fund managers who have been lax about the precision of their valuation dates, report formats, or RTA coordination processes now face a harder deadline and a more visible accountability trail.

The February 2026 circular connects valuation to the depository infrastructure in a way that makes vague or delayed valuation processes immediately visible.

How valuation interacts with the Annual Activity Report and performance benchmarking

The March 2026 shift to a two-tier AIF reporting framework (Annual Activity Report replacing four quarterly filings, with lighter Quarterly Activity Reports for June, September, and December quarters) has direct implications for how valuation is handled in compliance filings.

The Annual Activity Report, due within 30 calendar days of 31 March each year, requires disclosure of:

• The valuation methodology applied to each asset class in the portfolio during the year
• Any changes to valuation methodology made during the year, along with the old and new methodologies (both must be disclosed even where the change is not a material change under Clause 22.2.3 of the Master Circular)
• Compliance status confirming adherence to PPM obligations, including valuation frequency commitments
• Fund performance data including NAV movement across valuation dates

Performance benchmarking adds another layer. Under the AIF Master Circular, AIFs are required to provide audited data on cash flows and valuation of scheme-wise investments to SEBI-registered performance benchmarking agencies. The September 2024 circular extended this timeline from six months to seven months from the end of the financial year. This means an AIF with a March year-end must submit audited valuation data to the benchmarking agency by 31 October of the following year.

The data submitted to benchmarking agencies must be on an audited basis, the investment-level valuations used must have been verified by the statutory auditor. This creates a sequencing constraint: the audit of portfolio valuations must complete before the benchmarking submission can be made.

Timeline: AIF valuation compliance calendar

Deadline	Event	Applicable to
30 days from valuation date	NAV upload to depository via RTA	All AIFs (from Feb 2026)
Not less than semi-annually	Independent portfolio valuation	Category I and II AIFs
Not less than quarterly (close-ended)	NAV calculation and investor disclosure	Category III AIFs
Not less than monthly (open-ended)	NAV calculation and investor disclosure	Category III AIFs
Within 30 days of 31 March	Annual Activity Report filing	All AIFs
Within 7 months of 31 March	Audited valuation data to benchmarking agency	All AIFs
Compliance Test Report	NAV reporting confirmation	Trustees / Sponsors

When does a change in valuation methodology require investor disclosure?

This was one of the most actively debated questions in the AIF industry through 2023 and 2024, and SEBI’s September 2024 circular resolved it with meaningful clarity.

Under the pre-September 2024 framework, a “Material Change” to an AIF’s terms required the fund to offer an exit option to dissenting investors. The AIF industry argued that requiring an exit window for valuation methodology changes, particularly changes made to comply with SEBI’s own mandated IPEV or MF Regulations framework, was unreasonable and operationally disruptive.

The September 2024 circular addressed this in two steps. First, Paragraph 22.2.2 of the AIF Master Circular was revised to specify that a change in valuation methodology made in order to comply with Clause 22.1 (the standardised approach mandate) does not constitute a Material Change. A fund switching from a bespoke DCF framework to IPEV-compliant DCF does not need to offer exits.

Second, Paragraph 22.2.3 was introduced to address intra-methodology changes more broadly. A change in methodology or approach within the IPEV Guidelines or MF Regulations framework (for example, switching from a revenue multiple to an earnings multiple approach for a portfolio company that has become profitable) also does not constitute a Material Change. IPEV Guidelines are a broad framework that permits multiple techniques, and it would be operationally unworkable to treat every technique-level adjustment as a material event.

The obligation that replaces the exit window is a transparency obligation: both the old and new methodologies must be disclosed to investors. This applies even when neither constitutes a Material Change. The disclosure should be in writing, specific to the investee company or asset class affected, and retained in the records as required by Regulation 27(1)(b).

Disclosure does not require investor consent. It requires investor notification.

What are the practical compliance gaps fund managers get wrong?

The valuation framework has been in force long enough that SEBI’s oversight and the AAR’s disclosure requirements are now surfacing consistent problem patterns. These are not theoretical risks. They are the gaps we see in live fund reviews.

1. PPM valuation disclosures that do not match practice

The PPM must specify the valuation methodology, the frequency of valuation, and the identity or category of the appointed valuer. Funds that updated their PPM at launch but have since changed valuers, shifted from semi-annual to quarterly valuation, or adopted IPEV without updating the PPM language carry a documentation mismatch. The AAR’s PPM compliance audit will flag this. Correction requires a PPM amendment. For material changes, this also triggers an investor communication process.

2. Using a valuer who no longer qualifies under the September 2024 criteria

Some funds appointed valuers under the pre-2024 framework where the eligibility criteria were interpreted differently. The September 2024 circular clarified entity-level valuer requirements. Fund managers should confirm that the deputed professional at their valuation firm holds ICAI, ICSI, ICMAI, or CFA credentials, not just that the firm has an IBBI entity registration. If the firm rotates the assigned professional and the replacement does not hold the required credentials, the fund’s next valuation report may not be issued by an “eligible independent valuer” under the current framework.

3. Valuation date vagueness that creates a 30-day upload problem

The February 2026 depository reporting circular triggers a 30-day window from the “portfolio valuation date.” For independent valuations, the valuation report date is the reference. For funds that have loose arrangements where the valuer submits drafts in one month, revisions the next, and a final report after further discussion, pinning down the valuation date is non-trivial. Fund managers must now have documented, unambiguous valuation dates in their engagement letters with the valuer, and the RTA must be notified immediately upon finalisation.

4. Not disclosing valuation changes made within the IPEV framework

The September 2024 clarification that intra-framework methodology changes are not Material Changes created a misconception in some funds: that no disclosure is required for such changes at all. Paragraph 22.2.3 of the Master Circular requires disclosure to investors of both old and new methodologies even when the change is not a Material Change. Skipping this disclosure is a regulatory non-compliance regardless of how minor the methodology adjustment was.

5. Benchmarking agency submissions on unaudited data

The seven-month window for benchmarking data submissions (by 31 October for March year-end funds) is tight. Several funds have submitted investment-level valuation data based on management accounts rather than audited figures, particularly for portfolio companies where statutory audit completion runs late. The framework requires audited data. Submitting on an unaudited basis and correcting later is not a clean solution, benchmarking agencies use the first submission in their datasets and corrections may not propagate to historical records cleanly.

Treelife practitioner note

In the AIF engagements we have run at Treelife, the valuation compliance gap that comes up most frequently is not about which methodology to use. Fund managers generally understand IPEV at a conceptual level. The gap is operational: the valuation process has not been embedded into the fund’s governance calendar in a way that connects to the PPM, the LPA, the RTA, the statutory auditor, and now the depository.

The February 2026 NAV depository reporting mandate made this visible. When we work through a fund’s first depository NAV upload, we almost always find that the fund does not have a documented valuation date definition in its engagement letter with the valuer. The valuer issues a report; the fund manager reviews it; there may be one or two rounds of revision; the final report carries a date that is sometimes two to four weeks after the actual valuation cut-off. That gap between cut-off and report date has now become a compliance variable because the 30-day depository upload window runs from the report date, not the cut-off.

The other pattern is the benchmarking agency submission. Under Regulation 23 and the Master Circular, the requirement has been in place for some time, but the enforcement rigour has sharpened with the AAR’s requirement to disclose valuation methodology and the benchmarking data now being cross-referenced. Funds that have been filing NAV figures to SEBI without simultaneously filing to the benchmarking agency are now exposed to two separate compliance gaps, not one.

A defensible valuation process is one where the methodology is documented in the PPM, the valuer meets September 2024 eligibility criteria, the valuation date is unambiguous, the RTA is on a 30-day upload schedule, the statutory auditor has reviewed the valuations before the October benchmarking deadline, and the AAR disclosure reflects actual practice. Each of these is a separate workstream that needs to be coordinated, not left to converge at the end.

Frequently asked questions on AIF & Valuations

Q: Is the IPEV Guidelines framework mandatory for all AIFs, or only for Category I and II?
A: The IPEV Guidelines apply to valuation of unlisted securities across all AIF categories. Category III AIFs investing in unlisted securities must also value those positions under IPEV. The distinction is not by AIF category. It is by asset class: listed securities use MF Regulations norms; unlisted use IPEV.

Q: Does SEBI prescribe which IPEV technique must be used for a given investment?
A: No. SEBI mandates adherence to the IPEV Guidelines (December 2022 edition) but does not specify which of the IPEV techniques must be used for any particular investment type. The choice of technique is the valuer’s professional judgment call, applied consistently from period to period and documented in the valuation report.

Q: What is the cost of independent portfolio valuation typically?
A: Fees vary significantly based on the number and complexity of portfolio companies, the valuation techniques required, and the credentials of the valuer firm. For a Category II fund with five to eight portfolio companies, independent semi-annual valuation by an IBBI-registered firm typically ranges from ₹3 lakh to ₹10 lakh per cycle. SaaS-heavy or real estate portfolios requiring multiple techniques tend to attract higher fees. Treelife can assist in structuring the valuer engagement and benchmarking fee terms.

Q: How long does the end-to-end AIF valuation process take?
A: From the date the valuer requests financial data from portfolio companies to the final signed report typically takes four to eight weeks for a five-to-eight company portfolio. Delays most commonly arise at portfolio company data collection (especially where companies resist sharing financials with a fund’s external valuer) and at the revision cycle between valuer and manager. Building a structured data request process with clear deadlines into the investment monitoring calendar compresses this materially.

Q: What documents must be maintained under Regulation 27(1)(b) for valuation?
A: The manager must maintain records describing valuation policies and practices, the methodology applied to each investment at each valuation date, the identity of the valuer (including credentials), the valuation report, and any investor disclosures made in relation to methodology changes. These records must be maintained for a period of eight years from the date of cessation of the fund’s activities (Regulation 29, SEBI AIF Regulations 2012).

Q: Does the depository NAV reporting requirement apply to funds launched before the February 2026 circular?
A: Yes. The circular applies to all registered AIFs regardless of when they were launched. The initial upload deadline was 01 May 2026, or within 30 days of the next portfolio valuation date, whichever is later. All existing funds needed to have uploaded at least their most recent available NAV by this point.

Q: What happens if an AIF cannot upload NAV because its RTA is not connected to the depository system?
A: AIF managers are responsible for ensuring their RTA is technically capable of uploading NAV data to NSDL and CDSL per the February 2026 circular. If the RTA is not yet configured, the manager must either reconfigure the existing RTA arrangement or appoint a capable RTA before the next valuation date falls due. SEBI has directed depositories to build the necessary infrastructure; the accountability for accuracy and timeliness sits with the AIF manager.

Q: If a foreign investor is in the fund, do FEMA valuation norms also apply to AIF portfolio investments?
A: Where a foreign-owned and controlled AIF undertakes secondary purchases or sales of unlisted securities, FEMA 1999 and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 require that such transactions be executed at fair value. The IPEV-based valuation used for NAV purposes can serve as the fair value basis for FEMA compliance, provided the valuer is independent and the methodology is documented. SEBI and RBI alignment on this point requires careful structuring; funds with cross-border LPs should ensure FEMA compliance is reviewed alongside the valuation framework.

Q: What triggers the requirement to disclose valuation methodology changes to investors?
A: Any change in valuation methodology or technique, whether or not it constitutes a Material Change, must be disclosed to investors with both the old and new methodologies specified (Paragraph 22.2.3, AIF Master Circular, May 2024, as amended September 2024). Material Changes additionally require an exit option for dissenting investors, except where the change is made to comply with the SEBI-mandated standardised framework (Paragraph 22.2.2). The Material Change exit window must be completed within three months.

Q: How do valuation norms apply to GIFT City AIFs registered with IFSCA?
A: AIFs registered with the International Financial Services Centres Authority (IFSCA) under the IFSCA (Fund Management) Regulations, 2022 operate under a separate regulatory framework. IFSCA has its own valuation norms for fund management entities operating within the GIFT IFSC. SEBI’s AIF valuation framework does not directly apply to IFSCA-registered funds, though many IFSCA-regulated managers adopt IPEV Guidelines as industry standard practice. Cross-border funds with both SEBI and IFSCA registration require jurisdiction-specific compliance analysis.

Q: What are the penalties for non-compliance with AIF valuation norms?
A: SEBI can take regulatory action under Section 15HB of the SEBI Act, 1992 for non-compliance with regulations and circulars. Penalties can include monetary sanctions, restrictions on launching new schemes, suspension of registration, or cancellation of AIF registration in severe cases. In practice, SEBI has used show cause notices and settlement proceedings for valuation-related violations. Non-compliance also creates civil liability risk if investors suffer loss attributable to an incorrect NAV, a more acute risk where the fund accepts subscriptions or redemptions at an unsupported NAV.

Q: How does performance benchmarking data submission differ from the SEBI quarterly/annual filings?
A: The AAR and QAR are filed with SEBI through the SEBI Intermediary Portal. Performance benchmarking data, specifically audited cash flow and investment-level valuation data, is submitted to SEBI-empanelled performance benchmarking agencies such as IVCA’s benchmarking cell. The two are separate filings with separate deadlines. The AAR is due within 30 days of 31 March. Benchmarking data is due within seven months of 31 March, i.e., by 31 October. Both require audited figures, so the sequencing of the statutory audit relative to both deadlines matters.

Q: Is there a reporting obligation when a portfolio company’s valuation changes significantly between periods?
A: The AIF Master Circular requires AIFs to transparently communicate valuations to investors, particularly when there is a change of more than 20% between consecutive valuations or more than 33% within a financial year. These thresholds trigger enhanced disclosure in investor reports. The specific disclosure mechanism should be specified in the fund’s PPM and LPA; most institutional LPAs in the Indian market require the manager to notify investors within a specified period of any valuation movement exceeding these thresholds.

Q: What should a fund manager look for when onboarding a new independent valuer?
A: Verify four things before appointment: (1) the entity is a Registered Valuer Entity with IBBI; (2) the individual professional who will be deputed to the engagement holds ICAI, ICSI, ICMAI, or CFA credentials; (3) the firm has no conflict of interest with the fund manager, sponsor, or any portfolio company; and (4) the firm’s engagement letter defines the valuation date unambiguously and commits to a specific report delivery timeline. A fifth consideration for institutional-quality funds: does the valuer have experience with IPEV Guidelines and can they present and defend their methodology to LP advisory committees?

Regulatory references:

• Regulation 23(1), 23(2), 23(3): SEBI (Alternative Investment Funds) Regulations, 2012. Valuation frequency requirements by category.
• Regulation 27(1)(b): SEBI (Alternative Investment Funds) Regulations, 2012. Record-keeping obligations for valuation policies.
• Regulation 10(aa): SEBI (Alternative Investment Funds) Regulations, 2012 (as amended). Dematerialisation requirement for AIF investments.
• Circular No. SEBI/HO/AFD/PoD/CIR/2023/97 dated 21 June 2023. Standardised approach to valuation of investment portfolio of AIFs (subsumed in AIF Master Circular Chapter 22).
• SEBI AIF Master Circular dated 07 May 2024. Chapter 22: Standardised approach to valuation; Clause 22.1 (two-track framework); Clause 22.2.2 and 22.2.3 (Material Change carve-outs).
• Circular No. SEBI/HO/AFD/PoD-1/P/CIR/2024/123 dated 19 September 2024. Modification in framework for valuation of investment portfolio of AIFs (independent valuer eligibility reform; reporting timeline extension to seven months).
• Circular No. HO/19/34/11(8)2025-AFD-POD1/I/4335/2026 dated 06 February 2026. Reporting of value of units of AIFs to depositories (NAV depository reporting mandate).
• SEBI AIF Master Circular dated June 2026. Semi-annual independent valuation mandate confirmed; co-investment limited to accredited investors.
• IPEV Guidelines, December 2022 edition. Endorsed by IVCA under Clause 22.1.2 of the AIF Master Circular.
• IPEV Guidelines, December 2025 edition. Supersedes December 2022 edition; effective for quarterly reporting periods beginning on or after 01 April 2026; IVCA confirmed as India Country Partner.
• Section 15HB, SEBI Act 1992. Penalty provisions for regulatory non-compliance.
• Companies (Registered Valuers and Valuation) Rules, 2017. Applicable to IBBI registered valuer eligibility.
• Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Fair value requirements for secondary transactions involving foreign investors.

External sources:

• SEBI (Securities and Exchange Board of India)
• IBBI (Insolvency and Bankruptcy Board of India)
• Reserve Bank of India
• IFSCA (International Financial Services Centres Authority)