SEBI calls for standardised approach to valuation of investment portfolio of AIFs

Presently, AIF Regulations focus on disclosures to investors and do not prescribe any guidelines on valuation procedures. Now, SEBI has recommended that AIFs may be mandated to adopt International Private Equity and Venture Capital Valuation Guidelines for carrying out the valuation of their investment portfolio. IPEV guidelines specify for various valuation methodologies such as Market Approach, Income Approach, and Replacement Cost Approach.

SEBI has also proposed that AIFs undertake the valuation of their investment in portfolios in unlisted securities by an independent valuer. Since the Category I and II AIFs invest predominantly in unlisted securities where the market price is unavailable, the requirement for an independent valuer has been imposed. Category III AIFs are required to have the unlisted securities in their investment portfolio valued by an independent valuer in order to determine NAV.

SEBI enhances the responsibilities of a manager. Now, Managers of AIFs shall be required to ensure that valuation based on audited data of the investee company is reported to performance benchmarking agencies only after the audit of books of accounts of the AIF in terms of AIF Regulations. The board also prescribed a number of additional things.

Consultation papers are kept open for public comments. Comments as per the prescribed format may be sent by email by January 23, 2023.

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