Key takeaways
- The deal landscape in 2026
- Pricing, lock-ins, and the exit clock
- How investors actually get access
- Pricing the illiquidity
- The risks to weigh
The deal landscape in 2026
Twelve Indian unicorns are now in the active pre-IPO bucket — meaning they have a board-approved DRHP target within 18 months. AIFs are entering at the secondary stage from existing PE/VC backers rather than primary rounds.
Pricing, lock-ins, and the exit clock
Entry valuations are typically pegged at a 15-20% discount to the last primary round. Lock-ins extend 12 months past listing. The realistic mark-to-market timeline for a feeder investor is 24-36 months, not the quick listing-pop story marketers like to sell.
How investors actually get access
Individual investors rarely buy into a unicorn's cap table directly. Access usually comes through one of three routes: a Category II AIF that aggregates capital and negotiates an allocation; a secondary purchase of shares from an early employee or existing investor; or a structured note packaged by a wealth platform. Each adds a layer of fees, and each sits behind the same lock-in once the company lists.
Pricing the illiquidity
A pre-IPO mark is an estimate, not a price you can realise. Until the company lists, the holding is valued off the last funding round and adjusted for a discount for lack of marketability (DLOM). That discount is exactly why pre-IPO can be attractive — but it is also why a paper gain can evaporate if the eventual IPO prices below the last private round, as several 2022-23 listings demonstrated.
The risks to weigh
- IPO-window risk — a company can stay private far longer than planned if markets turn, extending your lock-in indefinitely.
- Down-round risk — late-stage valuations can reset lower, and feeder investors usually lack the protective terms that institutional rounds carry.
- Concentration — a single name can dominate the return, so size the position as venture capital, not as a core holding.
- Layered fees — management fee, carry, and platform charges all compress the net outcome.
Frequently asked questions
What is an Alternative Investment Fund (AIF)?
An AIF is a privately pooled investment vehicle registered with SEBI that invests in assets beyond traditional listed equity and plain debt — such as private equity, private credit, venture capital, and hedge-fund-style strategies. SEBI classifies AIFs into Category I, II and III.
Who can invest in an AIF in India?
AIFs are meant for sophisticated investors. The minimum commitment is generally ₹1 crore (₹25 lakh for the fund's own employees and directors), and most schemes cap the number of investors per scheme at 1,000.
How is an AIF different from a mutual fund?
Compared with mutual funds, AIFs have far higher minimums, lower liquidity (often multi-year lock-ins or drawdown structures), lighter day-to-day disclosure, and — in Category III — the ability to use leverage and derivatives. They target a smaller, more sophisticated investor base.
How are AIFs taxed?
Broadly, Category I and II AIFs enjoy pass-through status — income (other than business income) is taxed in the hands of investors — while Category III AIFs are typically taxed at the fund level. Tax treatment is complex and depends on the income type; confirm specifics with your tax advisor.
Key terms
- Category I / II / III
- SEBI's three AIF buckets: Cat I (start-ups, SME, infra, social ventures), Cat II (private equity, private credit, real estate funds — no leverage for investing), Cat III (hedge-fund-style strategies that may use leverage and derivatives).
- Commitment & drawdown
- The total amount an investor agrees to invest (commitment) is called down by the fund in tranches (drawdowns) as it deploys capital, rather than all upfront.
- Hurdle rate
- The minimum return a fund must deliver to investors before the manager earns performance fees (carry).
- Carry (carried interest)
- The manager's share of profits above the hurdle rate — commonly around 20% — that aligns the manager's payout with investor returns.
- Lock-in
- The period during which committed capital cannot be redeemed. Cat I and II AIFs are close-ended with multi-year tenures.