Sebi's AIF amendments a mixed bag

Among the numerous new regulations the Securities and Exchange Board of India (SEBI) approved on Tuesday (June 25), those relating to alternative investment funds (AIFs) drew mixed response from investors. They welcomed the move to register angel pools under a new sub-category 'Angel Funds' in the 'Category I- Venture Capital Funds' list, as it would provide easier tax norms for funds which would get 'tax pass through' status.  

However, the new guidelines also raised apprehensions about how individuals who invest in angel funds would respond to the minimum limit set for investment. They mandate a minimum investment of Rs 25 lakh. Mahendra Swarup, President, Indian Venture Capital Association, pointed out that a minimum investment of Rs 25 lakh by an individual investor is too large a commitment. What would individual angel investors who had set aside, say, around Rs 12 to 15 lakh to invest in start-ups do?

The rules could also dampen the investment sentiment of affluent individuals who might want to associate with a couple of angel networks or more. They will have to invest a minimum of Rs 25 lakh in each of the funds, which may not bode well for the investment ecosystem. He added that since a bunch of these investors would first have to register as a fund, it remains to be seen if the move is supportive of entrepreneurship and funding in the early stage where it is most critical, or not.