Key Takeaways
- • Kotak India Growth Fund II settled SEBI proceedings by paying Rs 10.87 lakh ($11,300) for exceeding a five-year delay in winding up and distributing proceeds to limited partners.
- • The fund, launched in 2007 with $440 million corpus, completed its winding-up process on October 16, 2025—more than five years after its March 27, 2020 tenure expiration date, violating SEBI's Venture Capital Funds regulations.
- • SEBI's settlement approval came on May 11, 2026, following a revised settlement application filed by the fund after an internal committee meeting on February 10, 2026; payment was remitted on May 21, 2026.
- • The settlement falls under SEBI's Venture Capital Funds Settlement Scheme, which establishes tiered settlement amounts based on delay duration; 29 venture capital funds availed the scheme in total.
- • The fund's portfolio included notable exits such as ING Vysya Bank, which later merged with Kotak Mahindra Bank in 2015, demonstrating the long-term nature of VC fund lifecycles and subsequent regulatory compliance challenges.
Summary
Kotak India Growth Fund II, a venture capital fund managed by the alternative investment arm of Kotak Mahindra Group, has settled regulatory proceedings with India's Securities and Exchange Board of India (SEBI) following a significant delay in its winding-up process. The fund paid Rs 10.87 lakh (approximately $11,300) to resolve the case, with the settlement formally approved on May 11, 2026, and payment submitted on May 21, 2026.
The fund was raised in 2007 with a corpus of $440 million and commenced operations on March 27, 2008, with an initial nine-year tenure extendable by three years. This framework established a maturity date of March 27, 2020. However, the fund did not complete its winding-up process and distribution of liquidation proceeds to limited partners until October 16, 2025—a delay exceeding five years beyond the contractual maturity. The extended timeline constitutes a breach of SEBI's Venture Capital Funds regulations, prompting regulatory action.
The fund's portfolio included substantial investments across financial services, biotechnology, and infrastructure sectors, with notable holdings in ING Vysya Bank, Minda Corp, Bharat Serums and Vaccines Ltd, and NSL Renewable Power Pvt Ltd. The ING Vysya investment proved significant given its subsequent merger with Kotak Mahindra Bank in 2015, demonstrating the complexity of multi-year venture capital fund lifecycles and exit timelines.
The settlement process began when SEBI initiated proceedings; the fund subsequently filed a settlement application. Following discussions between SEBI's internal committee and fund representatives on February 10, 2026, the fund submitted revised settlement terms for consideration. SEBI's High Powered Advisory Committee (HPAC) and Panel of Whole-time Members reviewed and approved the settlement on May 11, 2026. This settlement was facilitated under SEBI's Venture Capital Funds Settlement Scheme, which establishes structured settlement amounts based on winding-up delay duration. According to the scheme framework, delays up to one year incur a base settlement amount of Rs 1,00,000, with escalating amounts for longer delays. Overall, 29 venture capital funds have availed themselves of this settlement scheme following the regulatory notice.
The case underscores ongoing compliance challenges within the venture capital ecosystem, particularly regarding timely fund dissolution and investor distribution processes. Kotak's settlement reflects broader regulatory scrutiny of SEBI-registered funds that transitioned between regulatory regimes—this fund operated under legacy Venture Capital Fund Regulations even after SEBI's Alternative Investment Fund Regulations replaced them in 2012, a regulatory gap that persisted until final winding-up.
The fund was raised in 2007 with a corpus of $440 million and commenced operations on March 27, 2008, with an initial nine-year tenure extendable by three years. This framework established a maturity date of March 27, 2020. However, the fund did not complete its winding-up process and distribution of liquidation proceeds to limited partners until October 16, 2025—a delay exceeding five years beyond the contractual maturity. The extended timeline constitutes a breach of SEBI's Venture Capital Funds regulations, prompting regulatory action.
The fund's portfolio included substantial investments across financial services, biotechnology, and infrastructure sectors, with notable holdings in ING Vysya Bank, Minda Corp, Bharat Serums and Vaccines Ltd, and NSL Renewable Power Pvt Ltd. The ING Vysya investment proved significant given its subsequent merger with Kotak Mahindra Bank in 2015, demonstrating the complexity of multi-year venture capital fund lifecycles and exit timelines.
The settlement process began when SEBI initiated proceedings; the fund subsequently filed a settlement application. Following discussions between SEBI's internal committee and fund representatives on February 10, 2026, the fund submitted revised settlement terms for consideration. SEBI's High Powered Advisory Committee (HPAC) and Panel of Whole-time Members reviewed and approved the settlement on May 11, 2026. This settlement was facilitated under SEBI's Venture Capital Funds Settlement Scheme, which establishes structured settlement amounts based on winding-up delay duration. According to the scheme framework, delays up to one year incur a base settlement amount of Rs 1,00,000, with escalating amounts for longer delays. Overall, 29 venture capital funds have availed themselves of this settlement scheme following the regulatory notice.
The case underscores ongoing compliance challenges within the venture capital ecosystem, particularly regarding timely fund dissolution and investor distribution processes. Kotak's settlement reflects broader regulatory scrutiny of SEBI-registered funds that transitioned between regulatory regimes—this fund operated under legacy Venture Capital Fund Regulations even after SEBI's Alternative Investment Fund Regulations replaced them in 2012, a regulatory gap that persisted until final winding-up.
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