New Delhi, June 26 -- The Securities and Exchange Board of India (SEBI) has penalized the investment manager and trustee of Exfinity Technology Fund for several violations of the Alternative Investment Fund (AIF) Regulations, including failing to wind up the scheme on time and breaching the overseas investment limit.
In an order issued on June 25, the market regulator imposed a fine of Rs 10 lakh each on the fund's investment manager, Exfinity Venture Partners LLP, and trustee, Vistra ITCL (India) Ltd
Exfinity Technology Fund, which was launched in 2013 as a Category-I AIF, counted among its limited partners (LPs) Canbank Venture Capital Fund's Electronic Development Fund and the Jhunjhunwala family office RARE Enterprises, according to VCCEdge, the data and research platform of VCCircle.
The fund provided seed and early-stage capital to technology startups in India and the US, typically investing between $1 million (Rs 9.4 crore) and $2 million in portfolio companies. Its portfolio included Kinara AI, fitness company Curefit, security analytics firm CloudSEK Information Security Pvt Ltd and logistics startup Locus, operated by Mara Studios Pvt Ltd, in India, and imaging solutions provider Lensbricks Inc and energy-management software company Virtual Power Systems in the US.
Several violations
The fund, which had a tenure of five years, extendable twice by one year each, had to achieve the final close by August 2014 and extended its term until August 2021. It was required to liquidate its holdings and distribute the proceeds by August 2022. However, it took investors' consent and, against regulations, extended the scheme's life until August 2023.
The fund failed to wind up even within this extended timeline and availed a fresh liquidation period provided to funds under SEBI circulars issued in April and July 2024. However, it again failed to wind up the scheme within this period, which ended in April 2025.
Exfinity Technology Fund was also found to have delayed filing its quarterly report for March 2023 by eight days. When asked for an explanation, it said the delay was caused as it was occupied with answering SEBI's queries and this diverted compliance resources. The regulator refused to accept this reasoning, saying these functions are expected to run in parallel.
AIFs are not permitted to invest more than 25% of their investible corpus overseas. However, Exfinity Technology Fund was found to have breached this limit between January 5, 2017, and July 26, 2023, with overseas investments accounting for 25.06% of its corpus. The fund disputed this calculation, saying SEBI should not have included certain components, and also submitted that the breach was caused by the introduction of the Goods and Services tax (GST) in 2017.
The regulator dismissed the argument, saying the fund had not given sufficient details or rationale to back its claims. It also said the breach first occurred in January 2017, whereas GST rollout happened only later that year in July.
The fund was also found in violation for failing to carry out the valuation of its investments for the half-year ended September 2023 and for failing to disclose material compliance failures in its compliance test report (CTR) for FY24 to trustee Vistra ITCL (India).
Investment manager Exfinity Venture Partners was found to have failed in its fiduciary responsibility to ensure that the fund complied with AIF regulations.
Meanwhile, Vistra ITCL (India) submitted that it had undertaken all available measures to push the investment manager to wind up the scheme, including drafting and circulating the necessary documents and conducting multiple calls and in-person meetings.
However, the regulator found the trustee had deviated from its fiduciary role by failing to direct the fund to initiate the winding-up process or formally register its dissent.
Published by HT Digital Content Services with permission from VC Circle.