Blame it on the investor complaints or recent reports of opaque accounting, the Securities & Exchange Board of India (Sebi) is taking a close look at how private equity houses (PE) and venture capital funds (VCF) value the startups and unicorns they bankroll.
The capital market regulator has asked a large number of funds to disclose their valuation practices, any significant change in the valuation methodology in the past three years, qualification of the valuer, if the valuer hired is an associate of the fund or its manager or sponsor among other things, The Economic Times reported on September 12, citing two persons aware of the matter.
Moneycontrol could not independently verify the report.
Reportedly, as per the Sebi directive dated September 6, the funds have to also share - the date of latest valuation, cost of cumulative investments made, latest valuation of investment portfolio, whether the valuation exercise is based on audited or unaudited data of the investee companies, whether the valuation is done by an independent or internal valuer, if additional valuation exercise was carried out during a financial year, details of valuation methodology and if there were any deviations from the said methodology, and whether the scheme has a valuation committee.
According to experts who spoke with ET, this move shows that the market regulator wants to understand credibility of the valuation exercise undertaken by funds. With this, the Sebi will get a sense of on the performance of the AIFs (alternative investment funds) and understand the valuation practices prevalent in the industry.
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