SEBI’s Proposal to Ease Rules for Large Value Funds: A Deep Dive
SEBI Consultation Paper
SEBI’s Proposal to Ease Rules for Large Value Funds
On August 8, 2025, the Securities and Exchange Board of India (SEBI) released a consultation paper proposing significant flexibilities for Large Value Funds (LVFs) under the Alternative Investment Funds (AIF) Regulations.
The proposals may look technical, but the implications are meaningful. If implemented, they could alter how high-value investors participate in India’s private markets. The initiative is part of SEBI’s broader agenda to align regulatory frameworks with market realities, encourage deeper domestic participation, and streamline compliance for sophisticated investors.
Consultation paper: https://www.sebi.gov.in/reports-and-statistics/reports/aug-2025/consultation-paper-on-providing-flexibilities-to-large-value-funds-for-accredited-investors-lvfs-under-sebi-aif-regulations_95957.html
Understanding the Basics: What Are LVFs?
LVFs are a specialised category of AIFs with stringent eligibility criteria. Key features include:
Investor profile: Every participant, except the manager, sponsors, or related employees, must be an Accredited Investor (AI).
Minimum ticket size: Currently set at ₹70 crore per investor.
Target base: High-net-worth individuals, family offices, institutional investors, and global funds with the expertise and appetite for alternative assets.
Investment focus: Unlisted securities, private equity, venture capital, and other alternative asset classes.
Market snapshot (as of June 30, 2025):
62 LVF schemes in operation
78 domestic investors and 25 foreign investors
₹1.34 lakh crore committed
₹60,788 crore raised and ₹58,963 crore deployed
Who Are Accredited Investors?
Accredited Investors qualify based on:
Financial capacity to make large-ticket investments
Expertise or access to expertise for due diligence
Risk awareness of the reduced regulatory protections compared to retail investors
Under SEBI’s framework, AIs must explicitly confirm their consent to participate under the AI framework, acknowledge the risks, and accept reduced regulatory oversight.
Why SEBI Wants to Change the LVF Rules
Since their launch in August 2021, LVFs have seen steady interest, but growth has been constrained by:
High entry barrier: ₹70 crore per investor excludes many capable domestic players.
Regulatory mismatch: The PMS Regulations have a ₹10 crore minimum for large-value investors, far below LVF requirements.
Institutional limits: Entities such as LIC (3% per fund) and GIC (5% of assets) cannot justify ₹70 crore allocations to a single LVF.
SEBI’s Ease of Doing Business Working Group has recommended lowering thresholds or allowing group-based eligibility calculations to widen access.
The Proposed Changes at a Glance
The consultation paper outlines seven proposals:
Lowering the minimum investment threshold from ₹70 crore to ₹25 crore to broaden access without diluting investor sophistication.
Exempting LVFs from NISM certification requirements for at least one key investment team member.
Simplifying Private Placement Memorandum (PPM) rules by exempting LVFs from the standard template and annual audits.
Automatic exemption for investment committee members from compliance liability without separate investor approvals.
Removing the 1,000-investor cap for LVFs.
Allowing existing AIFs to convert into LVFs with unanimous investor consent.
Making formal amendments to AIF Regulations to incorporate these changes.
Strategic Implications
For Domestic Capital Formation
Lower thresholds could bring in insurance companies, domestic pension funds, and large family offices as regular LVF participants.
For Compliance Costs
Removing PPM audits, NISM certifications, and certain committee liabilities could substantially reduce operational overhead for managers.
For Market Accessibility
While still targeting the ultra-high-net-worth segment, the lower entry point could diversify the LVF investor pool and channel more capital toward growth equity and pre-IPO opportunities.
Potential Concerns
Risk concentration: Even sophisticated investors could face higher exposure to illiquid, high-risk assets.
Reduced oversight: Exemptions could create oversight blind spots, particularly in governance.
Global positioning: At ₹25 crore, India’s threshold would remain higher than in many international markets, which might limit cross-border participation.
Public Consultation
SEBI has invited public comments on these proposals until August 29, 2025 via its online portal. Stakeholders can also email SEBI officials with the subject line “Consultation paper on providing flexibilities to LVFs under SEBI (AIF) Regulations”.
Conclusion
SEBI’s proposed reforms are a calculated step toward modernising the LVF framework. By lowering barriers, easing compliance, and aligning LVF norms with broader investment regulations, the regulator could create a more attractive environment for channeling large-scale domestic capital into high-potential, often illiquid sectors.
If adopted, these changes could shift the balance of India’s alternative investment market, positioning LVFs as a more practical and scalable vehicle for long-term institutional and ultra-high-net-worth participation.