Securities and Exchange Board of India (SEBI) chairman Tuhin Kanta Pandey has urged alternative investment funds (AIFs) to adopt stricter valuation practices as more portfolio companies prepare to tap public markets, warning that weak pricing frameworks could undermine investor confidence.
“AIFs often invest in early-stage and illiquid assets. In such cases, credibility begins with valuation,” Pandey said at the IVCA Conclave on Wednesday. “Weak or opaque valuations erode confidence. When investee companies move toward public markets, valuation concerns can distort price discovery and weaken trust. Therefore, fair valuation matters.”
His remarks come as private equity and venture capital-backed companies increasingly look to exit through initial public offerings. According to industry estimates, dozens of such companies are expected to approach public markets in the coming quarters.
Pandey also said AIF managers must help prepare investee companies for life as listed entities by embedding stronger governance practices early.
As businesses move to public ownership, they must be ready for stronger governance standards, including independent boards, robust related party safeguards and audit discipline. AIFs that embed these practices early help create stronger, market-ready companies, he said.
Growing industry
India’s AIF industry has expanded rapidly in recent years. The country now has over 1,700 registered AIFs, with total commitments of about ₹15.74 trillion and investments of ₹6.45 trillion as of December 2025, reflecting a compound annual growth rate of nearly 30 per cent over the past five years.
Pandey said the sector plays a key role in channelling long-term capital into areas where traditional financing may be limited.
However, he cautioned that the industry must ensure that growth is accompanied by stronger standards. “On market development, we expect robust risk management, disciplined valuation practices, prudent investment behaviour, ethical portfolio management and increasing integration of ESG considerations where relevant. In short, growth must be accompanied by standards, that is non-negotiable,” he said.
Faster launches
At the same time, SEBI is looking to ease certain processes to improve efficiency in the AIF ecosystem.
Pandey said the regulator is exploring a “lodge and launch” model for certain AIF schemes, under which reliance could be placed on due diligence certificates issued by merchant bankers.
For certain AIF schemes, reliance can be placed on due diligence certificates from merchant bankers. “This framework can improve ease of doing business, accelerate fund launches and support faster mobilisation of private capital,” he said.
For schemes meant only for accredited investors, AIF managers would remain responsible for disclosure and due diligence.
The number of accredited investors has also increased sharply — from 649 in May 2025 to 2,181 as of February 2026 — reflecting SEBI’s efforts to simplify the accreditation framework.
Going ahead, the regulator is also looking to streamline accreditation through digital public infrastructure and reduce the cost of certification.
Pandey also called on AIFs to deploy more capital into innovation-led sectors. “India needs long-term capital for healthcare, education, climate transition, sustainable infrastructure and other priority sectors. AIFs can help channel domestic and global capital to these areas,” he said.