1. Introduction
An Alternative Investment Fund holds what is often the hardest thing in finance to price: unlisted equity, structured credit, early-stage holdings and other illiquid assets for which no daily market quote exists. Yet the value placed on that portfolio drives everything that matters to investors, the net asset value they see, the management fee they pay, the carried interest the manager earns, and the returns the fund reports to the market. For years, two funds holding identical assets could report materially different values and each be compliant, because the rules addressed disclosure more than method.
That changed with SEBI’s standardised valuation framework, which now requires an AIF’s investment portfolio to be valued independently, on a consistent methodology, by an eligible valuer registered with the IBBI. This article puts the registered valuer at the centre: who qualifies to act as one, the regulatory architecture behind that requirement, how the fund’s portfolio is actually valued, and the frequency, reporting and governance obligations that surround it. For a broader look at why fund-level valuation matters in the first place, see our article on What Is Fund Valuation and Why It Matters for AIFs in India.
2. Who May Act as the Registered Valuer
The manager must ensure the AIF appoints an independent valuer who satisfies SEBI’s eligibility criteria, and the September 2024 circular resolved the earlier confusion between individuals and firms:
- Independence. The valuer must not be an associate of the manager, sponsor or trustee, and must be free of any conflict of interest with the investee companies. The practical test is whether the report and its inputs can withstand external scrutiny without the manager having shaped the outcome.
- Experience. The valuer must have at least three years’ experience in the valuation of unlisted securities, reflecting that this is specialist work.
- An individual valuer must be registered with the IBBI as a Registered Valuer and hold membership of the ICAI, ICSI or ICMAI, or a CFA charter from the CFA Institute.
- An entity valuer must be a Registered Valuer Entity registered with the IBBI, and the specific person or persons deputed to carry out the AIF valuation must hold ICAI, ICSI, ICMAI or CFA membership. SEBI deliberately moved away from requiring a threshold of the firm’s partners or directors to be registered valuers, focusing instead on the credentials of the professionals actually doing the work.
- Alternative route. A holding company or subsidiary of a SEBI-registered Credit Rating Agency may also qualify, along with any further criteria SEBI may specify.
Not sure your current valuer meets the September 2024 eligibility criteria? We can review your appointment against SEBI’s individual and entity valuer requirements — no charge, 30 minutes. Write to crm@marckenconsulting.com.
3. The Regulatory Architecture
The framework sits on Regulation 23 of the SEBI (Alternative Investment Funds) Regulations, 2012, and a sequence of amendments and circulars built on top of it:
- The 2023 amendment. The AIF Regulations were amended and notified on 15 June 2023, and SEBI issued its circular on a “Standardised approach to valuation of investment portfolio of AIFs” (SEBI/HO/AFD/PoD/CIR/2023/97) on 21 June 2023, effective 1 November 2023. This introduced a standardised methodology, cast responsibility on the manager, set eligibility for the independent valuer, and mandated reporting to benchmarking agencies.
- The 2024 Master Circular. These provisions were consolidated into Chapter 22 of the Master Circular for AIFs dated 7 May 2024.
- The September 2024 modification. SEBI’s Valuation Framework Circular (SEBI/HO/AFD/PoD-1/P/CIR/2024/123) dated 19 September 2024 streamlined the valuer eligibility criteria, extended the benchmarking-reporting timeline, and clarified that a methodology change made to comply with the framework is not a “material change”.
Underpinning all of this is the Registered Valuer regime itself, which flows from Section 247 of the Companies Act, 2013, read with the Companies (Registered Valuers and Valuation) Rules, 2017. Valuation of an AIF’s securities falls within the IBBI asset class of Securities or Financial Assets.
4. Why AIF Valuation Carries Special Weight
AIF valuation is not a one-off exercise like a valuation for a sale or a fundraise. It is a recurring, governance-oriented discipline that must be consistent across periods, comparable across the portfolio, and defensible to investors, auditors and SEBI at the same time. Three consequences flow directly from the portfolio value:
- The net asset value reported to investors and used for subscriptions and redemptions.
- The management fee, which is typically computed on committed or invested capital and on NAV.
- The carried interest, or performance fee, which crystallises against valued returns.
Because these economic outcomes depend on the number the valuer produces, independence and method are not formalities. They are what make the value trustworthy.
5. How the Portfolio is Valued
SEBI standardised the method rather than leaving it to each manager’s discretion. The starting point is the type of security:
- Securities with prescribed norms. For securities where valuation norms are already prescribed under the Eighth Schedule of the SEBI (Mutual Funds) Regulations, 1996, those norms apply.
- All other securities. For everything else, chiefly unlisted equity and unlisted debt, valuation follows the guidelines endorsed by an AIF industry association whose membership represents at least 33% of SEBI-registered AIFs. The eligible association endorsed the International Private Equity and Venture Capital Valuation Guidelines (the IPEV Guidelines), which are the global standard for pricing private equity and venture holdings.
Within the IPEV framework, the valuer selects and reconciles the recognised approaches according to the facts of each holding:
- Market approach using comparable-company multiples or the price of a recent investment or transaction.
- Income approach principally the Discounted Cash Flow (DCF) method, for holdings with reasonably estimable cash flows.
- Asset-based approach or net-asset method, for asset-heavy or holding structures.
The exercise is a fair-value determination, consistent with Ind AS 113, and most AIF holdings sit at Level 3 of the fair-value hierarchy, requiring judgement-based models with documented, supportable assumptions. A central IPEV principle is calibration: checking that the chosen methodology, applied as at the date of the most recent investment, reproduces the transaction price, and explaining or adjusting for any material difference so that the valuation stays grounded in market evidence over time. Early-stage holdings, where cash flows are speculative, call for particular care, often milestone-based or option-pricing techniques with a fully reasoned rationale. The manager must disclose the methodology adopted for each asset class in the Private Placement Memorandum.
6. Frequency, Deviations and Disclosure
- Frequency. Category I and II AIFs must value their portfolios at least once every six months, extendable to once a year with the approval of 75% of investors by value; many institutional-quality funds value quarterly as best practice. Category III AIFs value more frequently on a NAV basis, quarterly for close-ended schemes and monthly for open-ended schemes. For a fuller breakdown of which AIFs this applies to, see Fund Valuation Applicability in India.
- Large deviations. Where the value of an asset class deviates by more than 20% between two consecutive valuations, or by more than 33% within a financial year, the manager must inform investors of the reasons, which may include changes in assumptions, accounting policies or methodology.
- Methodology change. Following the September 2024 circular, a change in valuation methodology or approach made to comply with the framework is no longer treated as a “material change” that would trigger an exit option for dissenting investors. However, to preserve transparency, the valuation under both the old and the new approach must be disclosed to investors.
If your last valuation moved more than 20% between periods, SEBI requires you to disclose why. We help managers document and defend deviation reasons before they draw investor or SEBI scrutiny. Write to crm@marckenconsulting.com.
7. Reporting and Governance
- Valuation policy. Every AIF must adopt a board or trustee-approved valuation policy that documents the methodology, frequency, independence criteria and conflict-resolution mechanism, applied consistently across the portfolio and disclosed in the PPM.
- Benchmarking agencies. AIFs must report audited data on cash flows and scheme-wise investment valuations to SEBI-empanelled performance benchmarking agencies. The September 2024 circular extended this timeline from six to seven months from the financial year-end, so that for a 31 March year-end the deadline is 31 October, based on the investee companies’ audited financials.
- Enabling audited data. To make that possible, the manager must build into the subscription or investment agreement a timeframe requiring each investee company to furnish audited accounts.
- Manager responsibility. The manager and the key management personnel must ensure the independent valuer computes the valuation in the specified manner, and the manager remains responsible for a true and fair valuation. Where the established policy would not produce a fair value, the manager must deviate and document the rationale. Compliance with these provisions is confirmed through the fund’s periodic compliance reporting.
8. Recent and Upcoming Developments
Two current items are important for any valuation cycle in 2026:
- IPEV Guidelines, December 2025 edition. This edition supersedes the December 2022 edition and applies to reporting periods beginning on or after 1 April 2026, that is, FY 2026-27 onwards, with early adoption encouraged. SEBI’s Master Circular endorses “the IPEV Guidelines” as a living framework rather than pinning the mandate to a specific edition, so valuers are expected to apply the 2025 edition for periods from 1 April 2026. The update preserves the established fair-value framework while expanding guidance on complex capital structures and hybrid instruments such as venture debt and SAFEs, and on calibration and documentation.
- Depository reporting of NAV. By SEBI circular dated 6 February 2026, AIFs must report the net asset value of each scheme’s units, at the ISIN level, to the depositories (NSDL and CDSL) through their Registrar and Transfer Agents, by 1 May 2026 or within 30 days of the valuation date, whichever is later. For an independent valuation, the valuation date is the date of the valuation report, which makes fixing an unambiguous valuation date in the engagement more important than ever.
Download our one-page checklist covering the IPEV 2025 transition, the February 2026 depository NAV mandate, and the valuer eligibility criteria — everything to confirm before your next valuation cycle. Write to crm@marckenconsulting.com to receive it.
9. Frequently Asked Questions
Who qualifies as a registered valuer for an AIF?
An individual registered with the IBBI who holds ICAI, ICSI, ICMAI or CFA membership, or a Registered Valuer Entity registered with the IBBI whose deputed professionals hold those credentials, in each case independent of the manager, sponsor and trustee and with at least three years’ experience in valuing unlisted securities.
Is an independent valuer mandatory for an AIF?
Yes. Under the SEBI framework, an AIF’s investment portfolio must be valued by an eligible independent valuer registered with the IBBI. Internal manager valuations do not satisfy the requirement.
How often must an AIF value its portfolio?
At least semi-annually for Category I and II AIFs (extendable to annual with the approval of 75% of investors by value), and more frequently for Category III AIFs, quarterly for close-ended and monthly for open-ended schemes.
Which valuation guidelines apply?
Mutual-fund norms for securities already covered by them, and otherwise the IPEV Guidelines endorsed for AIFs, applied on a fair-value basis consistent with Ind AS 113.
When must valuation data be reported to benchmarking agencies?
Within seven months of the financial year-end, that is, by 31 October for a 31 March year-end, on an audited basis.
10. How Marcken Consulting Can Assist
Our valuation practice is led by an IBBI Registered Valuer (Securities or Financial Assets) who is a member of the ICAI, satisfying the eligibility route for an individual independent valuer under the SEBI framework. We provide independent portfolio valuations on a DCF, comparable-companies and asset basis in line with the IPEV Guidelines and the SEBI framework, independent cross-verification and second-opinion reviews of existing valuations, and support in drafting or reviewing a fund’s valuation policy and PPM disclosures. Each engagement is documented to withstand investor, audit and SEBI scrutiny.
We offer a no-charge 30-minute consultation to discuss an AIF portfolio valuation, a cross-verification, or your valuation policy.
Website: marckenconsulting.com
Marcken Consulting LLP — IBBI-Registered Valuer (Securities or Financial Assets)
Phone: +91 99980 59923 / +91 99985 39902
Email: crm@marckenconsulting.com
