Securities and Exchange Board of India (Sebi) chairperson Tuhin Kanta Pandey on Wednesday cautioned against weak and opaque valuation practices in the alternative investment space, saying investments should deliver more than just financial returns and must be backed by sound fundamentals.
Speaking at the 15th IVCA Conclave 2026 organised by the Indian Venture and Alternate Capital Association (IVCA), Pandey said valuations require greater discipline, especially as Alternate Investment Funds (AIFs) invest in early-stage businesses.
He said distorted valuations can affect proper price discovery in the market and create risks for investors. Pandey noted that AIF (Alternative Investment Funds) managers have a key responsibility to conduct strong due diligence before deploying capital.
According to him, Sebi expects the industry to adopt disciplined valuation practices to ensure transparency and investor confidence. His remarks mark one of the first instances where the regulator has spoken so directly about valuation concerns in the AIF ecosystem.
AIF industry growing rapidly
Pandey said the AIF industry in India is expanding quickly and has already become an important source of capital for emerging sectors.
The sector currently has investments worth about Rs 6.5 trillion and total commitments of around Rs 16 trillion, he said.
“I hope they would be able to supplement real capital flows into the right sectors,” Pandey added.
Sebi plans to further ease accreditation process
The Sebi chief also said the regulator has already simplified the accreditation process for AIF investors and plans to ease it further.
Under current rules, non-accredited investors can participate in AIFs only if they meet the minimum investment requirement of Rs 1 crore.
Accredited investors, however, do not face any minimum investment threshold. Pandey said such investors must meet strict financial strength and net worth requirements.
Policy changes on border-country investments welcomed
Pandey also welcomed recent changes in the foreign direct investment (FDI) policy for investments coming from countries that share land borders with India.
The Union Cabinet recently approved modifications to the Press Note 3 framework to introduce a defined timeline for approvals in critical sectors.
According to the government, the revised policy will help boost manufacturing in areas such as electronic components, capital goods and solar cells.
What are AIFs
An Alternate Investment Fund is a privately pooled investment vehicle set up in India that collects funds from sophisticated investors, both domestic and foreign. These funds invest according to a defined investment strategy for the benefit of their investors.
The sector has grown rapidly in recent years as institutional and high-net-worth investors increasingly turn to alternative assets beyond traditional equities and debt.