Sebi's NAV upload mandate for alternative funds inevitable demat cleanup: Industry experts

SEBI

The Securities and Exchange Board of India (Sebi) issued a fresh directive on February 6, 2026, forcing Alternative Invstment Funds (AIFs) to feed International Securities Identification Number (ISIN) NAVs into depositories. The  industry says it was an anticipated “compliance checkbox”.

The circular requires AIF managers to transmit the latest NAV for each unit to the National Securities Depository Ltd (NSDL) and Central Depository Services (India) (CDSL), through their Registrars and Transfer Agents (RTAs). The deadline is May 1, 2026, or within 30 days from the "valuation date" of the portfolio — whichever is later.

In a sector where NAVs are already computed and disseminated quarterly to investors and regulators, this directive plugs a narrow data void in Consolidated Account Statements (CAS). CAS refers to those monthly depository missives that list an investor's holdings across asset classes.

Pre-circular, AIF units appeared in CAS as mere placeholders: "X units held," sans rupee value, rendering statements incomplete beside the marked-to-market valuations of equities, mutual funds, or bonds.

“At its core, the circular seemingly operationalises demat's half-finished promise,” said an industry expert.

'Sebi completing unfinished plumbing'

While not a seismic shift in AIF governance, Girish Sankar, Chief Strategy Officer at Computer Age Management Services (CAMS), said, “This circular was inevitable. Once demat happened, NAV upload was unavoidable. It's Sebi completing unfinished plumbing." CAMS is one of India's largest RTAs handling over 90 percent of AIF servicing.

Recall Sebi's 2023 demat mandate (SEBI/HO/IMD/IMD-I DOF3/P/CIR/2023/092), which compelled AIFs to issue units in dematerialised form by October 2024, aiming to centralise holdings data and curb fragmentation across 1,000+ funds. Demat worked (most units now reside in NSDL/CDSL ledgers), but without NAV uploads, depositories couldn't compute or display values.

Experts iterate that the February circular rectifies this by mandating RTAs as the conduit: AIFs furnish NAVs to RTAs, who push them into depository APIs or portals. Technically, uploads occur per ISIN (a unique 12-character code denoting a specific scheme or class). The NAV must reflect the latest post-valuation computation, adhering to existing norms under the AIF Regulations, 2012 (as amended).

For Cat I (social venture/angel funds) and Cat II (private equity/real estate/debt) segments, valuation is computed, at least semi-annually, by an independent valuer under IBBI guidelines or IPEV standards (as per SEBI's 2020 valuation circular, SEBI/HO/IMD/DF3/CIR/P/2020/222). Cat III (hedge/long-short) positions require quarterly or monthly, often daily computation for liquid strategies.

Mandatory disclaimer by depositories

Depositories, as directed by Sebi, display NAV with a mandatory disclaimer: "The value of units of AIFs displayed... is based on the valuation methodology and accounting practices followed by the AIF. Investors are advised to refer to the valuation policy and other disclosures of the AIF."

This carve-out is no boilerplate, it's a legal nod to AIFs' bespoke nature. “Unlike mutual funds' standardised daily NAVs, AIF valuations are lumpy, investor-specific, and waterfall-driven, where returns cascade through hurdles, carried interest (typically 20 percent), and catch-up clauses before hitting unitholders,” said another expert.

A senior executive at a leading alternatives firm underscored the circular's narrow scope. He said, "NAV calculation is routine. It is reported to investors, as per the Private Placement Memorandum (PPM), and to Sebi quarterly, and to benchmarking agencies every six months. This is just an additional channel. There's no standardisation being achieved to be clear as we go on to assess the circular’s impact. Different funds use permitted methodologies, so NAVs will vary legitimately."

Industry experts also clarified no significant surge in investor complaints, or any valuation scandals were the triggers. No systemic NAV delays or enforcement cases either. This aligns with SEBI's stated rationale: leveraging depository infrastructure for "enhanced transparency and operational efficiency."

Privately placed AIFs

Privately placed AIFs — capped at 1,000 investors, with no public trading — already furnish NAVs directly via tatements or updates. The upload benefits Sebi's data aggregation (bye-bye Excel silos) and CAS completeness more than end-investors.

The 30-day window? Most industry experts call it to be "comfortable". Even for RTAs, it marks no constraints. "We'll build the systems," said an expert.

He further added, “The challenge is in declaring NAV within that frame, especially of unlisted assets valued semi-annually."

AIF's structural quirks further reveal why the disclaimer is also a lawyer's lifeline. “Cat I/II's pass-through taxation and investor-level computations: Two investors in the same Class A ISIN can have different NAVs due to drawdown defaults, equalisation credits, entry timing, or series accounting (e.g., April 1 vs. April 15 cohorts). Depositories operate at class level, so CAS shows aggregated NAV, potentially variant from the fund's authoritative Statement of Value (SOV)," explained an expert.

This mismatch risks confusion at redemption or distribution, where actual payouts hinge on investor-specific waterfalls (e.g., preferred returns at 8-12 percent before carry kicks in.) Funds may deem SOV binding, leaving CAS as an indicative snapshot.

"Expect some variance. It's like stopping the waterfall one level early — less precise,” the expert highlighted. “Multi-class funds (driven by commercial differentials, like 1.5 percent fee for Rs 1 crore commitments vs. 1 percent for Rs 5 crore) spawn dozens of ISINs, amplifying manual uploads for corporate actions (unit issuances/credits).”

ISIN creation is automated, but crediting? Still manual— high error risk from decimal slips. Therefeore, the industry plea seems to be bulk file uploads or APIs from depositories to "reduce effort and errors."

For a Rs 5 lakh crore AUM sector (up 30 percent YoY), this new circular is therefore simply a regulatory housekeeping.

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