Resolut Partners GP-Led Secondaries in India – Considerations and Challenges -

GP-Led Secondaries in India – Considerations and Challenges

August 25, 2022

The secondaries market constitutes an important facet of the global alternative investments ecosystem. At its core, the secondaries market seeks to address two fundamental issues: (i) providing liquidity to investors (limited partners); and (ii) avoiding premature disposal of promising assets and upside potential of the assets. The existence of a robust secondaries market has had a ripple effect on fundraising since sponsors are able to raise funds with longer lifespans.

In this piece, we examine the features of GP-led secondaries and discuss some of the considerations and challenges involved with GP-led secondaries in India.

Key Takeaways:
  • GP-led secondaries have become fairly popular globally given that they solve for the liquidity concerns among some LPs whilst allowing the GP to capture more upside from an investment.
  • In a GP-led secondary deal, it is important to find a pricing that works for the exiting investors but keeps the acquisition attractive for the incoming investors.
  • Owing to the bespoke nature of a GP-led deal – where the seller as well as the buyer are controlled and managed by the same entity – LPs of both funds will want to be satisfied that the GP has acted fairly and in their respective best interests.
  • Cat I and Cat II AIFs are generally not permitted to invest more than 25% of investible funds in a single investee company. This could make AIFs unworkable for GP-led secondaries if the continuation fund cannot house the assets proposed to be rolled over.
  • The tax and regulatory frameworks applicable to AIFs do not currently provide for a tax-neutral rollover 
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