SEBI lens on alternate investment funds — experts discuss pros and cons

Capital markets regulator SEBI has raised questions over a popular trend in the debt markets, whereby loans are restructured by alternate investment funds (AIFs), set up by private equity firms along with non-banking financial companies (NBFCs).

In an interview to CNBC-TV18, Srini Sriniwasan, MD of Kotak Investment Advisors; Umesh Revankar, VC and MD of Shriram Transport Finance; and Ananth Narayan, Professor, SPJIMR, spoke at length about the consequences.

First up, Sriniwasan said, “This is an elegant solution and it is important to understand that subscribers to an AIF — be that an NBFC or other investor — are sophisticated investors.”

Meanwhile, Revankar said, “We are into retail lending and in retail lending, we do not see any kind of scope and opportunity for such kind of a deal.”

However, Narayan said no one can have a problem with any kind of restructuring, “The broader problem is, when the restructuring happens or when a fresh refinancing happens, is there a proper valuation of original exposure and is there a proper disclosure around what this means to the original exposures?” he said.