What Is a Private Placement Memorandum? How to Read an AIF PPM

An Alternative Investment Fund cannot advertise or sell to the public. Under the SEBI (Alternative Investment Funds) Regulations, 2012, it may raise money only through private placement, by issuing an "information memorandum or placement memorandum, by whatever name called". Everyone calls it the private placement memorandum, or PPM.

The AIF PPM does three jobs at once.

1. It is the disclosure document. Regulation 11(2) lists what it must contain: all material information about the fund and the manager, the key investment team's background, targeted investors, fees and all other expenses, tenure, limits on redemption, investment strategy, risk-management tools, key service providers, the investment committee's terms of reference, conflicts of interest, disciplinary history, the manager's affiliations, and how the fund will be wound up.
2. It is the rulebook. The contribution agreement you sign must be aligned with the PPM and cannot go beyond its terms, under SEBI's AIF Master Circular. Every year an auditor checks whether the fund followed it.
3. It is the evidence. The manager must give you the AIF placement memorandum before you commit and take your acknowledgement that you received it.

That is why SEBI's Investor Charter for AIFs opens its list of investor responsibilities with one instruction: read all fund documents, including the private placement memorandum, thoroughly.

This guide is for the investor holding a 100-page PDF and wondering where to start. For the wider mechanics of units, NAV and lock-in, start with our guide to how AIFs work in India. Two related topics get only a line here because they have their own guides: capital calls (how your commitment is drawn down in tranches) and carried interest (how the manager's profit share is calculated and taxed).

When the AIF Regulations arrived in 2012, they said what a placement memorandum had to cover but not how it should look. Each fund's lawyers wrote their own, so two PPMs could put fees in different places or bury the manager's regulatory history in an annexure. SEBI tightened the rules in steps:

• 2014: Circulars of 19 June and 18 July 2014 required a detailed tabular example of how fees apply to the investor, including the distribution waterfall, and clarified what "disciplinary history" covers.
• 5 February 2020: The "Disclosure Standards for AIFs" circular introduced a mandatory PPM template, an annual audit of compliance with PPM terms, and performance benchmarking, applicable from 1 March 2020.
• 21 October 2021: PPMs had to be filed with SEBI through a SEBI-registered merchant banker that certifies the disclosures after due diligence.
• 18 April 2024: A standard reporting format for the PPM audit report.
• 8 December 2025: Large Value Funds for Accredited Investors (LVFs) were freed from the template and the audit without investor waivers.
• 14 and 30 July 2026: SEBI cut the filing window from 30 days to ten working days and set the operating rules through its "GARUDA" circular. All of this now sits in the AIF Master Circular of 3 June 2026, updated to 7 September 2026.

The direction of travel is clear: disclosure has become more standard and detailed, while SEBI's own pre-launch review has become lighter. That trade-off shapes how you should read the document today.

SEBI calls the PPM "a primary document in which all the necessary information about the AIF is disclosed to prospective investors". To set a minimum standard, the SEBI PPM template has two parts:

• Part A holds the minimum disclosures. Every head must appear, and if one does not apply, the PPM must say "not applicable" against it rather than dropping it.
• Part B is a supplementary section where the fund may add any other information it thinks fit.

Funds may also add "supplementary information" sub-sections at the end of each Part A section. When you compare two funds, the headings line up, but the detail you need may sit in a supplementary sub-section or in Part B.

The PPM template for Category I and Category II AIFs has sixteen sections.

The cover page states that the PPM is confidential, addressed to a named investor, and that no return from the fund is assured or guaranteed.

Category III AIFs, which can trade listed securities and derivatives and may be open-ended, use a separate PPM template with the same sixteen-section skeleton. The difference is Section VIII, which becomes "Determination of the Net Asset Value of the Units", because an open-ended scheme needs rules for frequent NAV calculation, subscriptions and redemptions. In a Category III PPM, spend extra time on that section and on the redemption terms.

The PPM template does not apply to:

• Angel Funds as defined in the AIF Regulations.
• Schemes where every investor commits at least ₹70 crore (USD 10 million or equivalent) and signs a waiver in SEBI's prescribed format.
• Large Value Funds for Accredited Investors, without any investor waiver.

If you are a ₹1 crore investor, the template almost certainly applies to the fund you are looking at, and a PPM that does not follow it should prompt a question.

Before an AIF can "launch" a scheme (which SEBI defines as circulating the PPM to investors to solicit money), the PPM must be filed with SEBI. The route depends on the type of scheme.

"Regular schemes" are those other than LVFs, accredited-investor-only funds and Angel Funds, mainly funds that onboard investors at the ₹1 crore minimum. For these:

• The PPM is filed through a SEBI-registered merchant banker that is not an associate of the AIF, its sponsor, manager or trustee.
• The merchant banker independently checks all disclosures and files a due diligence certificate on the SEBI Intermediary Portal, along with fit-and-proper declarations and PAN details of key people.
• Regulation 12(2), amended with effect from 14 July 2026, requires filing at least ten working days before launch, down from 30 days. A first scheme launches from the later of registration or ten working days after filing.
• SEBI may send comments, and the merchant banker or manager must ensure they are complied with.

The first close must then be declared within 12 months of the date the fund became eligible to launch, or the AIF must file afresh.

• AI-only funds and LVFs file their PPM directly with SEBI, without a merchant banker or SEBI comments, and can launch on filing (a first scheme still waits for registration).
• Angel Funds, after the SEBI (AIF) (Second Amendment) Regulations, 2026, also skip the merchant banker and can circulate the PPM from registration.
• In place of a merchant banker's certificate, the manager's CEO and compliance officer sign an undertaking that the disclosures are true, fair and adequate.
• New AI-only schemes must end their name with "AI only fund" or "AIOF", and LVFs with "LVF", so the cover tells you which rules applied.

Every AIF PPM must carry a SEBI-mandated disclaimer that includes this sentence: "It is to be distinctly understood that submission of the PPM to SEBI should not in any way be deemed or construed that the same has been approved by SEBI." It adds that SEBI takes no responsibility for the accuracy of the disclosures or the capability of the manager.

Responsibility sits with the manager and, for Regular schemes, the merchant banker, both of whom, as Business Today's explainer of the GARUDA framework notes, are liable for action if the PPM contains a lapse. That is a real safeguard, but not a regulator's stamp. A fund can truthfully be called SEBI-registered with a PPM filed with SEBI; it cannot be called "SEBI approved".

The PPM keeps mattering after you sign, through an annual audit and a system for reporting changes.

SEBI makes an annual PPM audit mandatory:

• Who: an internal or external auditor, or a legal professional.
• When: at the end of each financial year, with findings and corrective steps sent to the AIF's trustee (or board or designated partners), the manager's board and SEBI within six months.
• How: in a standard reporting format published by industry associations, filed online on SEBI's Intermediary Portal.
• Optional sections: auditing "Risk Factors", "Legal, Regulatory and Tax Considerations", "Track Record of First Time Managers", "Illustration of Fees and Expenses" and "Glossary and Terms" is optional.
• Exemptions: AIFs that have raised no money file a chartered accountant's certificate instead. Angel Funds with investments at cost of ₹100 crore or less, ₹70 crore waiver schemes and LVFs are exempt; larger Angel Funds must do the audit from FY 2025-26.

The audit goes to the fund's governance bodies and SEBI, not to every investor, so it is reasonable to ask the manager whether the latest PPM audit raised findings.

• Ordinary changes to the PPM and fund documents are reported to investors and SEBI once a year, within one month of the financial year-end, with the changed pages. Regular schemes route this through a merchant banker; AI-only funds, LVFs and Angel Funds file directly.
• Material changes include a change in sponsor or manager, a change in control of either, and a change in the fee structure or hurdle rate that could raise fees. Dissenting investors must be offered an exit option with at least one month to decide. In a close-ended scheme, the manager (or someone it arranges) buys the units at no less than the average of two independent valuations, at no cost to unitholders.

You do not need to read a PPM front to back on the first pass. This order gets you to a yes, a no, or a list of questions fastest. Keep the executive summary open as you go; every later section should match it.

Start with Section I, then Section VII. Note:

• The fund's category and SEBI registration number, checked against SEBI's register of AIFs.
• The target corpus and the minimum commitment for your unit class.
• The term, extensions and the commitment period. A close-ended fund can extend its tenure by up to two years only with approval of two-thirds of unitholders by value.
• Drawdown terms: the purposes for which money can be called, the notice period and the penalty for a missed call. Our separate capital call guide covers drawdown planning.
• Transfer and exit: whether units can be transferred, on what conditions, and whether any early exit exists.

Read the fee terms in Section VII, then Sections XII and XIII. SEBI requires a tabular example of fees and the distribution waterfall, so the numbers should be there. Check:

• The management fee rate, its base (commitment, contributed capital or NAV) and any step-down.
• Set-up and operating expenses, and any cap.
• The hurdle rate, its currency and whether it compounds.
• Catch-up, clawback (the manager returning excess profit share, a mechanism common in private equity) and giveback (investors returning distributions to meet fund liabilities).
• The distribution fee. Every AIF must offer a Direct Plan with no distribution fee. Category III AIFs may pay distributors only on an equal trail basis; Category I and II AIFs may pay up to one-third upfront.

How carried interest is computed and taxed is covered in our dedicated guide.

In Section V, look for:

• The key investment team and key management personnel, which SEBI requires to be named. Changes must be intimated to investors.
• The key person clause in Section VII: who counts, what triggers it, and the remedy.
• The investment committee: size, how members are appointed and replaced, and how it decides.
• Removal of the manager: whether investors can remove it, and by what majority.

Section IX is where the manager admits where its interests may clash with yours. The AIF Regulations add a hard limit: investing in associates, or in AIFs managed or sponsored by the manager, sponsor or their associates, needs approval from 75% of investors by value, as does buying or selling investments from or to such parties. Check how warehoused investments (assets bought before closing and moved into the fund later) will be priced, and whether co-investment is offered to all investors.

If some investors get better terms through a separate unit class or side letter, the PPM must disclose the eligibility criteria, and those rights must not hurt other investors.

Section VIII must state the valuation methodology for each asset class. Section VI shows the track record; first-time managers may omit it, so you are then relying on the team's background. Where a PPM mentions past performance, SEBI requires the benchmarking agency's performance-versus-benchmark report alongside it. Agencies such as CRISIL publish AIF benchmarks by category.

• Risk factors run from concentration risk to default on capital calls, transfer restrictions and tax change. Boilerplate is normal; strategy-specific risks are the useful part.
• Disciplinary history covers the AIF, sponsor, manager and their directors, partners, promoters and associates, and the trustee, for five years, including pending cases, regulatory actions, defaults and penalties above ₹5 lakh. Minor warnings may be summarised, but you can ask for details.
• Investor complaints data sits in its own chapter next to SEBI's Investor Charter.

Investors coming from Portfolio Management Services often assume the AIF PPM is the PMS disclosure document under another name. Our guide on how to read a PMS disclosure document covers the PMS side; the short comparison is below.

In a PMS your holdings sit in your own demat account. In an AIF you hold units in a pool, and your exit runs through the PPM's terms, which is why the AIF document needs a closer read.

• Comparable structure. Every Category I or II PPM uses the same Part A headings, so you can compare Section VII with Section VII.
• Nothing silently missing. Inapplicable heads must be marked "not applicable".
• Numbers, not just words. The tabular fee example and waterfall scenarios let you test the economics.
• A five-year look at the people. Disciplinary history is a disclosure many investors would not get by asking.
• The PPM binds the paperwork. The contribution agreement cannot go beyond it.
• Independent eyes twice. A merchant banker checks disclosures before a Regular scheme launches, and an auditor checks compliance every year.
• An exit on big changes. A new manager, a change in control or higher fees cannot be imposed without an exit option.

Everything above applies to every SEBI-registered AIF. The hard part is time: a careful first read of one PPM can take an evening, and most investors are offered more funds than they can read. PMS Sahi Hai is built for the step before the PPM, so that the documents you do read are the ones worth reading.

PMS Sahi Hai describes itself as India's first AI-powered PMS and AIF marketplace. Here is how it fits a PPM-first way of investing:

• Shortlist on the same fields. The AIF comparison shelf puts funds side by side, and each fund page shows the same fields: minimum investment, AUM, returns, risk measures and a facts-and-fees panel. Where a fund has not disclosed something, the page shows a blank rather than a guess. Treat each blank as a question to check in Section VII or Section XII of that fund's PPM.
• Ask Nyra the structural questions first. Nyra, the platform's AI research analyst, answers from SEBI, AMC and IFSCA primary sources, cites a source for every answer and declines when no verifiable source exists. Use it to check which category a fund sits in, whether a scheme should be using the SEBI PPM template, or what an AI-only or LVF suffix means, before you meet the manager.
• Know what the score does not measure. Nyra rates strategies on a 0–10 scale across five pillars, and the scoring methodology is public. Strategies with less than 12 months of track record are "Not Rated". The score is backward-looking and built from disclosed performance data. It does not grade a fund's key person clause, conflicts or waterfall, so it narrows the list; the AIF PPM still decides.
• Read returns in the right unit. AIF track records and waterfall scenarios are often stated as IRR. The guide to internal rate of return explains what that number does and does not tell you.

An honest limit: PMS Sahi Hai does not review or score PPMs, and Nyra is a research tool rather than personalised investment advice. For a conversation about a specific document, the team offers a private 15-minute consultation.

None of these automatically rules a fund out; each is a reason to ask a pointed question. The most useful PPM red flags are the ones SEBI's own rules make visible.

Knowing the PPM's limits is part of how to read a PPM well.

• SEBI does not approve it. Since April 2026 SEBI has relied on merchant-banker and manager certifications for launch timelines, with scrutiny of scheme documents done after the fact on a sample basis, based on risk assessment, as SEBI's own GARUDA consultation paper records. Your own reading is a real line of defence.
• The audit skips some sections. Risk factors, legal and tax content, first-time manager track record, the fee illustration and the glossary are optional in the PPM audit, so a fund can pass without anyone checking its fee illustration.
• Protections thin out for bigger cheques. LVFs, Angel Funds and ₹70 crore waiver schemes can skip the template; AI-only funds and LVFs skip merchant-banker due diligence.
• First-time managers can show no track record.
• Change reporting is annual. Non-material changes reach you once a year; material changes trigger an exit only within the window offered.
• The document is long and legal. Advice from a SEBI-registered investment adviser or a lawyer is sensible before a large commitment, and any tax content in a PPM is general, so consult a tax adviser on your own position.

The private placement memorandum is the one document that brings together what an AIF may do with your money, what it costs, who decides and how you get out. SEBI has standardised the PPM template, required a numerical fee and waterfall example, added five years of disciplinary history and put an annual PPM audit behind it. It has also made clear that filing is not approval and, in 2026, shortened the gap between filing and launch.

That puts the reading on you. Start with the principal terms, test the fees, check the key persons, read the conflicts, look at valuation and benchmarked performance, and finish with risks and disciplinary history. Ask your questions before you sign, and make sure every promise you rely on is in the PPM itself. Tools such as PMS Sahi Hai's comparison shelf and Nyra can shorten the list of PPMs you need to read, but they do not replace reading the one you sign.

Reading one PPM well takes time, so read only the ones that deserve it. Narrow the field first: compare category, strategy, minimum commitment and fees on the AIF comparison shelf, and ask Nyra the structural questions, with a source cited for every answer. Then request PPMs for the two or three funds that fit your goals, liquidity and time horizon, and use the six-step order above on each.

When you have your list of questions, book a private 15-minute consultation with the PMS Sahi Hai team and walk through the principal terms, fees and exit rights before you sign anything.