Common PPM Template

Before 2020, every AIF wrote its own Private Placement Memorandum (PPM) in its own format. An investor comparing two funds had to hunt for the same fact in two different places.

SEBI fixed this with a common template. A February 2020 circular sets out a standard structure that every Category I and Category II AIF must follow when it drafts a PPM. The template does not change what a fund can offer — it changes how the fund must describe it, so an investor can compare funds like for like.

The template is annexed to the circular. It lists the disclosures section by section: an executive summary, the market and industry outlook, fees and expenses, fund governance, and more.

The common template comes from SEBI Circular SEBI/HO/IMD/DF6/CIR/P/2020/24, dated 5 February 2020, whose Annexure 1 sets out the template Category I and Category II AIFs must use.

Section I (Executive Summary) alone requires disclosure of: details of the AIF, scheme and sponsor; investment objective and strategy; target corpus; classes of unit capital; the scheme's tenure and any extension; minimum capital commitments; sponsor/manager commitment; the commitment period, drawdown terms and closing dates; management fee; preferred return (hurdle rate); additional return or carried interest; the expense structure; and the distribution waterfall for each class of units.

Section II (Market Opportunity/Indian Economy/Industry Outlook) requires the economic background, the sponsor's or manager's investment outlook, and the sector outlook relevant to the fund's strategy.

Three carve-outs let a fund skip the standard regime:

1. An angel fund — once its total investments cross Rs 100 crore at cost — is instead required to undergo an annual PPM compliance audit, effective FY 2025-26.
2. An AIF or scheme where every investor commits at least Rs 70 crore (or USD 10 million, or its equivalent in another currency) may be exempted, but only where each such investor also separately provides a written waiver to the fund from the standard template and the annual PPM audit — the exemption is not automatic on commitment size alone.
3. A large value fund for accredited investors need not follow the standard PPM template at all, and its PPM audits are not mandatory.

Meridian Growth Fund II, a Category II AIF, drafts its PPM strictly on SEBI's Annexure 1 template. Its Executive Summary discloses a target corpus of Rs 500 crore, a 2% management fee, a 10% hurdle rate (IRR basis), and a European waterfall, in that order, because that is the order the template prescribes.

A prospective investor comparing Meridian against a rival Category I fund can go straight to Section I in each PPM and find the hurdle rate and fee structure in the same place, without reading either document end to end.

Separately, Meridian raises a special scheme in which every one of its 12 investors commits at least Rs 70 crore each. Each of those 12 investors also signs a written waiver letter to the fund. For that scheme alone, Meridian's manager is exempt from SEBI's common template and from the annual PPM audit — the scheme's PPM can instead be drafted on a bespoke basis.

Chapter 9 (Legal Documents and Negotiations — Investor Perspective), section 9.5 (Private Placement Memorandum), names the February 2020 circular and its Annexure 1, and lists the Section I and Section II disclosures in Box 9.1. Expect a question on which circular created the common template, or on which category of fund is exempt from following it — the Rs 70 crore-per-investor waiver and the large value fund exemption are both directly testable.

• The common template is a disclosure format, not a set of investment restrictions. It standardises how a PPM is written, not what a fund may invest in.
• Rs 70 crore is a per-investor minimum commitment, and each investor must also give a written waiver — a scheme with one small investor, or with a large investor who has not signed a waiver, does not qualify for the exemption.
• An angel fund's PPM-audit obligation switches on at Rs 100 crore of total investments at cost — a separate, later-added condition from the Rs 70 crore waiver route for ordinary schemes.
• A large value fund for accredited investors gets both exemptions automatically — from the template and from the audit — while the Rs 70 crore route needs an active waiver from every investor.