New Delhi, June 8 -- A venture capital fund that Kotak Mahindra Group's alternative investment arm raised nearly two decades ago has settled a case with the Securities and and Exchange Board of India for a five-year delay in winding up and distributing proceeds to its limited partners.

The fund, Kotak India Growth Fund II, was launched in 2007 with a corpus of $440 million (Rs 1,800 crore then). It aimed to provide growth capital to companies operating across sectors such as financial services, biotechnology, and infrastructure. Its portfolio included ING Vysya Bank, Minda Corp, Bharat Serums and Vaccines Ltd, and NSL Renewable Power Pvt Ltd, according to VCCEdge.

The fund started operations on March 27, 2008. It had an initial tenure of nine years which was extendable by three years. The tenure was thus extended to March 27, 2020, according to the SEBI order issued on June 5.

However, the fund completed the winding-up process and the distribution of proceeds to its investors only on October 16, 2025, a delay of more than five years.

The regulator initiated proceedings against the fund and the fund filed a settlement application to settle the issue. SEBI internal committee met with the fund's representatives on February 10, 2026, after which the fund filed a revised settlement terms.

After the terms were considered by SEBI's High Powered Advisory Committee (HPAC) and Panel of Whole-time Members, the terms were approved finally on May 11, 2026. The fund paid Rs 10.87 lakh (around $11,300) to settle the proceedings and informed the regulator on May 21, 2026.

When the fund was launched in 2007, it was done under SEBI's Venture Capital Fund Regulations. In 2012, SEBI's Alternative Investment Fund Regulations came into play and VCF Regulations were repealed. But funds registered under the previous regulatory regime continued to be ruled by those rules until they were wound up.

Several funds registered under the previous regulatory regime found it difficult to wind up their schemes within their tenure. In August 2024, they were given the option of migrating to the new regime and, once migrated, they could take an additional year to complete their winding up. A year later, in July 2025, SEBI also introduced a settlement scheme for funds who had not wound up on time. To avail this scheme, the fund had to migrate to the AIF regime and file an application before January 19, 2026.

Published by HT Digital Content Services with permission from VC Circle.