SEBI's New Reforms to Aid Alternate Capital, Reduce Threshold for LVFs Among the changes is SEBI's decision to reduce the threshold for Large Value Funds (LVFs), which by definition cater exclusively to accredited investors, from INR 70 crore to INR 25 crore. According to the IVCA, this was a long-awaited ask.

The Securities and Exchange Board of India (SEBI) has announced positive reforms as outcomes of its recent board meeting, and the Indian Venture and Alternate Capital Association (IVCA) said that they mark a crucial step towards strengthening India's alternate capital industry and building a more enabling environment for entrepreneurs and long-term investors.

Among the changes is SEBI's decision to reduce the threshold for Large Value Funds (LVFs), which by definition cater exclusively to accredited investors, from INR 70 crore to INR 25 crore. According to the IVCA, this was a long-awaited ask.

Another change has been the introduction of a new framework for schemes that are exclusively open to Accredited Investors (AIs). The "AI-only" schemes will operate under a calibrated compliance regime, recognising that accreditation, based on an independently validated framework, is a more reliable gauge of an investor's sophistication than the earlier minimum ticket size of INR 1 crore. The move is aimed at enabling a deeper pool of qualified investors to participate in India's growing AIF market, while ensuring that investor protection standards remain uncompromised.

SEBI has also indicated that existing schemes that meet the criteria can choose to migrate to this new AI-only scheme/LVF classification.

The schemes will be allowed several operational flexibilities and operate with agility, including relief from pari-passu obligations between investors, a longer permissible tenure of up to five years compared to two years for regular schemes, and the removal of the cap on the number of investors. LVFs are already exempted from certain requirements, such as the standardised Private Placement Memorandum (PPM) template and PPM audits, reducing administrative burden and enabling managers to focus on capital deployment.

Rahul Shah, Executive Vice-President, IVCA, said that SEBI's measures reflect a constructive and forward-looking approach to regulation.

"By moving from a purely threshold-based system to an accreditation-led framework, and by addressing operational constraints such as the 1,000-investor cap, SEBI has eased the process. Initiatives like these, including the introduction of CIV, an alternate medium for co-investments, earlier this year, reflect the regulator's growing trust and commitment to supporting the industry, which will strengthen investor confidence, facilitate sustainable growth, and play a defining role in shaping the next phase of India's alternate capital ecosystem," said Shah.

The previous ceiling of 1,000 investors per scheme will now apply only to non-accredited investors, meaning that Large Value Funds (LVFs) and AI-only schemes can operate without any investor cap.

SEBI has also introduced a phased glide path that will gradually shift the ecosystem from a threshold-based model to one led by investor accreditation.

These reforms come as India's AIF industry surpasses cumulative commitments of INR 13.5 lakh crore, underscoring its growing role in the country's capital formation. By easing participation norms and introducing greater flexibility, SEBI's measures are expected to pave the way for a more mature, globally competitive ecosystem, one capable of channeling significant volumes of patient capital into startups, infrastructure, and innovation-driven sectors critical to India's growth.

IVCA stated that it will continue to work closely with SEBI and other stakeholders to ensure the effective implementation of these changes, while championing a regulatory framework that fosters innovation and safeguards investor interests as India's alternate capital industry scales new heights.