SEBI’s Semi-Annual AIF Valuation Mandate: What It Actually Means For Fund Managers

The Securities and Exchange Board of India (SEBI) regulates Alternative Investment Funds, or AIFs, under the SEBI (Alternative Investment Funds) Regulations, 2012. These are pooled investment vehicles, typically venture capital funds, private equity funds, and hedge funds, that raise money from sophisticated investors and deploy it across listed and unlisted assets. Because a large part of that portfolio often sits in unlisted, illiquid holdings, the frequency and rigour of valuation has always mattered more here than in most other asset classes.

For years, Category I and II AIFs, which cover most VC and PE funds, were only required to get their portfolios independently valued once a year. SEBI has now tightened that requirement. Under the updated framework, these funds must value their investment portfolio at least once every six months, with an independent, SEBI-registered or IBBI-registered valuer carrying out the assessment.

This article looks at what the mandate actually requires, why SEBI introduced it, who it applies to, and what fund managers, trustees, and investors should be doing to stay compliant as the new cycle takes effect.

Why This Matters

On paper, this looks like a scheduling change. In practice, it changes how often a fund’s numbers get tested against reality, and how quickly a mismatch between reported value and actual performance can surface. For fund managers, that means more frequent engagement with valuers and tighter internal timelines. For investors, it means a materially better view into how a fund is performing between one annual report and the next.

What Changed, In Plain Terms

Under the SEBI (Alternative Investment Funds) Regulations, Category I and II AIFs were historically required to value their investment portfolio once every financial year. SEBI’s updated framework moves that floor to twice a year, independent valuation included.

There’s a small escape hatch. Funds can still stick to an annual cycle, but only if 75% of investors by value agree to it. In practice, most institutional LPs aren’t going to sign off on slower reporting, so semi-annual is becoming the default rather than the exception.

Category III AIFs were already ahead of this. Close-ended Category III funds value quarterly, and open-ended ones value monthly. So this change is really about bringing Category I and II, your typical VC and PE funds, closer in line with how often everyone else is already reporting.

Why SEBI Moved On This

A few things pushed this along.

• The Indian secondary market for fund interests and AIF units has been growing, and stale annual valuations don’t work well when someone wants to buy or sell a stake mid-year.
• Institutional LPs, especially foreign ones used to quarterly reporting elsewhere, have been asking for more frequent marks for years.
• Dematerialisation of AIF units, which became mandatory from April 2026, only works well if the NAV attached to those units is reasonably current.
• Regulators have generally been tightening the gap between how private markets and public markets report value, and this is one more step in that direction.

None of this is really about distrust of fund managers. It’s about the ecosystem around AIFs (depositories, LPs, secondary buyers) needing a number they can actually rely on.

Who This Applies To

Category I and II AIFs (venture capital funds, PE funds, infrastructure funds, and similar) are the ones directly affected by this shift from annual to semi-annual. Category III AIFs were already valuing more frequently and aren’t really touched by this particular change, though they’ve had their own updates too, including leverage caps and daily reporting for certain positions.

If your fund falls under Category I or II and your PPM still says annual valuation, that document is now out of step with the regulation, and it’s worth flagging before an investor or auditor does it for you.

The Independent Valuer Requirement

This is the part that trips people up. It’s not enough to run the numbers internally and call it done. SEBI requires the valuation to be carried out by an independent valuer, and that valuer needs to be either SEBI-registered or IBBI-registered.

For listed holdings, mark-to-market pricing does the job, there’s not much room for interpretation there. It’s the unlisted book, the portfolio companies that don’t trade on an exchange, where the real work happens. Those get valued using DCF, comparable company analysis, or an asset-based approach, depending on what actually fits the business.

This is exactly the kind of work that shouldn’t be squeezed into a finance team’s already packed quarter-end schedule. It needs someone who does nothing but this, who knows how IPEV guidelines are meant to be applied in an Indian context, and who can defend the number if an investor pushes back on it.

Why the IPEV Guidelines Keep Coming Up

SEBI has leaned on guidelines endorsed by a recognised AIF industry association, and IVCA (as India’s Country Partner for IPEV) has endorsed the International Private Equity and Venture Capital Valuation Guidelines for this purpose.

What that means practically is your valuer isn’t just picking a method they like. There’s an expected framework for how unlisted, early-stage, and growth-stage companies get valued, and it needs to be applied consistently across your portfolio and across cycles. A valuation that jumps between methodologies every six months without a clear reason is a red flag waiting to happen.

The PPM Gap Nobody’s Talking About

Here’s something we’re seeing more often than expected. Some funds committed to quarterly valuations in their original PPM, back when that was seen as a strong LP-friendly commitment. Now, with the regulatory floor sitting at semi-annual, some of those same funds have quietly slipped into a six-month rhythm and are citing the regulation as cover.

That’s not a grey area. If your PPM says quarterly, your fund needs to value quarterly, regardless of what the regulatory minimum happens to be. The Annual Audit Report now requires disclosure of both valuation methodology and frequency, and a mismatch between what you promised and what you’re actually doing gets picked up fast during a compliance audit.

If this sounds like your fund, it’s worth a proper look at the trust deed and PPM language before it becomes someone else’s discovery.

What Fund Managers Should Be Doing Right Now

• Check your current PPM and see what valuation frequency you’ve actually committed to, not what you assume the regulation requires.
• Confirm your independent valuer is properly registered, either with SEBI or IBBI, and that their engagement letter reflects the new timeline.
• Build the six-month cycle into your internal calendar now, not two weeks before the reporting deadline.
• Make sure your Compliance Test Report reflects the updated frequency accurately.
• If you’re planning to rely on the annual exception, get that 75% investor sign-off documented properly, don’t assume verbal agreement is enough.

None of this is complicated on its own. What trips funds up is treating it as a paperwork update instead of a real shift in how often the portfolio needs to be tested.

What This Means If You’re an LP

If you’re investing into a Category I or II AIF, you should start seeing valuation updates twice a year instead of once. That’s a genuinely useful change, it gives you a much better read on how a fund is actually performing between the big annual review and the next one.

It’s also worth asking your fund manager directly what their PPM commits to and whether their practice actually matches it. Most will be able to answer that in one line. If they can’t, that’s worth noting.

How ValuGenius Can Guide You

This is exactly the kind of shift where having the right advisor matters. ValuGenius works with fund managers, trustees, and portfolio companies across business valuation services, helping funds stay ahead of SEBI’s changing valuation timelines instead of scrambling to catch up. As a CA firm in Mumbai, we combine deep valuation expertise with the practical, on-ground understanding of an accounting firm that knows how Indian regulatory timelines actually play out.

Whether you need valuation services in Mumbai for an AIF’s unlisted portfolio, corporate valuation for a merger or restructuring, ESOP valuation for your employee stock plans, or FEMA valuation advisory for cross-border transactions, our team, backed by a chartered accountant in Mumbai on every engagement, builds valuation reports that hold up under investor scrutiny and regulatory review. If your fund’s PPM, valuer registration, or reporting cycle needs a second look before the next compliance deadline, that’s a conversation worth having with us early.

Final Thoughts

SEBI’s move to semi-annual valuation for Category I and II AIFs isn’t a dramatic overhaul, but it does close a gap that’s been sitting there for a while. Private markets in India are maturing, secondary transactions are becoming more common, and a once-a-year number just doesn’t hold up anymore.

The funds that treat this as an opportunity to tighten their valuation process, rather than a box to tick twice a year, are the ones that’ll have an easier time with LPs, auditors, and eventually their own exits.

If your fund needs an independent valuer for its portfolio or you’re not sure whether your current practice lines up with what SEBI now expects, that’s exactly the kind of conversation worth having early, not during the week your report is due.