--- title: "The Secondaries Revolution: India’s Next Private Capital Market" date: 2026-09-22 author: "Puneet Bhatia" url: https://ksandk.com/private-equity/india-secondaries-continuation-funds-private-capital-2026/ --- # The Secondaries Revolution: India’s Next Private Capital Market Posted On - 22 September, 2026 • By - Puneet Bhatia ![](https://ksandk.com/wp-content/uploads/Indias-Next-Private-Capital-Market.webp) ### Secondary transactions, continuation funds and the new architecture of liquidity in private capital --- ## Introduction: The exit problem is becoming a structuring problem For much of the first two decades of India’s [private equity and venture capital](https://ksandk.com/practice-areas/private-equity-vc-investment-in-india/) market, the central question was how to deploy capital. Fund managers competed for attractive companies, founders competed for capital and limited partners competed for access to successful managers. The exit was often treated as an event at the end of the cycle, delivered through an IPO, a strategic sale or another conventional realisation. That model is changing. India now holds a substantial stock of mature private-market assets in funds whose investment periods are approaching or have passed their intended holding horizons. At the same time, companies that have created significant value may not be ready for a strategic sale or a public listing. The result is a structural tension: the fund may need liquidity even when the underlying asset still has considerable growth potential. The secondary market answers that tension by letting capital move without requiring the underlying company to be sold. Limited partners can sell their interests before the end of a fund’s life; existing investors can sell portfolio stakes to new investors; founders and employees can obtain liquidity; and a general partner can transfer a valuable portfolio asset into a new continuation vehicle, allowing some investors to realise their investment while others remain invested. This is more than another exit technique; it changes the architecture of private capital. Global secondary transaction volume reached roughly US$240 billion in 2025, according to IVCA’s 2026 Secondaries Conference materials, and India has become an increasingly significant emerging-market jurisdiction for GP-led transactions. India’s market is still far less mature than the established secondary markets of North America and Europe, but the drivers are now firmly present: ageing fund vintages, longer holding periods, the institutionalisation of private capital and a growing universe of assets for which a conventional exit may not yet be optimal. The legal question is changing with it. It is no longer only how a fund exits an investment. It is how liquidity should be created while preserving value, protecting investors and managing the conflicts that arise when the same sponsor sits on both sides of the transaction. That question sits at the heart of India’s next phase of private-capital development. ## 1. From exit markets to liquidity markets The distinction between an exit market and a liquidity market is worth drawing carefully. In a conventional exit, an investment leaves the fund and the fund ceases to have an economic interest in the asset; a strategic or financial buyer acquires the company’s shares and the fund receives consideration. A secondary transaction can work very differently. The asset may remain privately held, the company may continue under substantially the same management, and the original sponsor may stay involved. The new investor may acquire only part of an existing position, or an existing investor may transfer its interest in the fund itself rather than the underlying portfolio company. This produces a range of transactions sitting between a traditional financing and a traditional exit. At one end is the LP-led secondary, where an investor sells its interest in an existing fund to another investor. At the other is the GP-led continuation transaction, where the sponsor creates a new vehicle to acquire one or more assets from an existing fund, giving liquidity to investors who want to exit while allowing others to roll their exposure into the new vehicle. Between these sit sponsor-to-sponsor portfolio sales, founder secondaries, employee liquidity transactions, pre-IPO secondary rounds and primary-plus-secondary financings. The legal architecture for each is different, and that difference will matter more as India’s secondary market develops. ## 2. Why India is reaching the secondary-market moment The emergence of secondaries is not accidental. India’s private-capital industry has expanded substantially, producing a much larger installed base of assets and funds. As of June 2026, SEBI reported approximately ₹17.53 lakh crore of cumulative commitments across registered AIFs, with about ₹7.59 lakh crore raised and ₹7.11 lakh crore invested; Category II AIFs alone accounted for roughly ₹13.03 lakh crore of commitments and ₹4.28 lakh crore of investments. Those numbers matter because the secondary market is ultimately a function of inventory. The more private capital deployed into businesses, and the longer those investments stay private, the greater the need for mechanisms that let investors realise liquidity without forcing an outright sale of the underlying business. The problem is sharpest for older fund vintages. A fund with a conventional ten-year life may hold a successful portfolio company whose optimal exit does not coincide with the fund’s contractual maturity. A sale at that point may be commercially unattractive, an IPO may be premature and a strategic buyer may not be available, yet the fund cannot hold the asset indefinitely without addressing its obligations to investors. A continuation vehicle bridges that gap by separating two decisions that were historically linked: whether the fund should exit the asset, and whether the investor should receive liquidity. A continuation transaction can answer yes to the second without necessarily answering yes to the first. That is the economic proposition behind the market. ## 3. LP-led secondaries: the simpler side of the market An LP-led secondary is the more straightforward form of secondary transaction. An investor in an existing fund sells all or part of its interest to a secondary buyer, who steps into the seller’s position subject to the fund documents and applicable regulatory requirements and assumes the associated rights and obligations. The selling LP gains liquidity before the fund’s scheduled termination; the buyer gains exposure to an existing portfolio without committing to a new fund and waiting through the full investment cycle; and the GP achieves an orderly change in the investor base without selling any portfolio company. Even these transactions are not merely bilateral share sales. Fund documents typically impose transfer restrictions, GP consent requirements, rights of first refusal or first offer, eligibility conditions and confidentiality obligations, and the buyer will usually require detailed information on the fund’s portfolio, unfunded commitments, valuation methodology and historical distributions. Where the seller or buyer is a foreign investor, the transaction also engages India’s foreign-exchange and investment framework. The secondary market therefore creates a category of legal work in which fund documentation, securities law, foreign investment and transaction execution converge. ## 4. Continuation vehicles change the conflict analysis The more consequential development is the GP-led continuation vehicle. A typical transaction involves an existing fund, the selling fund, transferring one or more portfolio investments into a newly established vehicle managed by the same GP or its affiliate. Investors in the existing fund can either take liquidity or roll their investment into the continuation vehicle, and new secondary investors may also come in. The economics can be attractive on all sides: the GP retains exposure to an asset it believes has further value-creation potential, existing investors receive a liquidity option, and new investors gain access to a mature asset with an established operating history. The structure also contains an inherent conflict, because the GP is effectively acting on both sides of the transaction. It owes duties to investors in the selling fund while holding an economic interest in the continuation vehicle, so it has an interest in negotiating a price favourable to the new vehicle even as the selling fund’s investors have an interest in obtaining the best possible price for their existing investment. This is what makes continuation transactions different from ordinary portfolio exits. The central legal question is not whether the transaction is permitted but whether the process through which it is conducted is rigorous enough to address the conflict. ## 5. SEBI’s framework was not originally designed around continuation funds India’s [AIF regulatory framework](https://ksandk.com/practice-areas/investment-management-law-firm/) provides the foundation for continuation structures, but it was not built around the sophisticated GP-led secondary market that has emerged internationally. The market is developing faster than the dedicated regulatory vocabulary. A continuation vehicle may need to be structured as a new fund or scheme depending on the circumstances; asset transfers between related funds or schemes can trigger investor-consent requirements; diversification requirements can become relevant, particularly for single-asset structures; valuation rules apply; PPM and disclosure considerations arise; and the sponsor or manager must address conflicts. The result is that the legal structure often has to be engineered around the existing AIF framework rather than relying on a bespoke “continuation fund” regime. Recent market commentary notes that Indian continuation-fund activity is becoming more visible, including large transactions involving established sponsors, while also highlighting the structural complexity created by India’s existing AIF architecture. That makes regulatory interpretation and transaction design especially important. ## 6. Investor consent is becoming a central governance mechanism One of the most important issues in a GP-led secondary is who approves the transaction. Where an existing fund transfers assets to an entity associated with the same sponsor or manager, the AIF framework contains investor-consent requirements for specified conflicted transactions, so the architecture already recognises that certain transactions call for a higher level of investor protection. SEBI’s June 2026 consultation paper on rationalising investor-consent requirements and the ambit of conflicted transactions is directly relevant, indicating that SEBI is examining whether the current consent architecture balances investor protection against operational efficiency. This is an important development for continuation funds. A regime that requires consent for every conceivable conflict can make legitimate transactions difficult to execute, while a regime that lets a GP set the terms of a transaction with an affiliated vehicle without adequate investor oversight creates an obvious governance risk. The direction of travel appears to be toward a more calibrated framework focused on material conflicts, meaningful disclosure, appropriate consent thresholds and investor protections, rather than treating every related-party transaction identically. ## 7. Valuation is the economic heart of a continuation transaction If conflict is the governance problem, valuation is the economic one. A continuation transaction requires the parties to fix the value at which the existing asset moves into the new vehicle, and that valuation affects the cash received by investors who exit, the ownership percentage received by investors who roll over and the economics of new investors coming in. The difficulty is that the GP typically has better information about the asset than the selling LPs and may have a financial interest in both the selling fund and the continuation vehicle. The valuation process therefore has to be sound enough to withstand scrutiny from investors with competing economic interests. SEBI’s AIF framework contains valuation requirements, but a sophisticated continuation transaction may call for more than the minimum standard: independent valuation, third-party advisers, fairness analysis, a competitive secondary process and detailed disclosure to investors. The objective is [credible price discovery](https://ksandk.com/mergers-acquisition/earn-outs-deferred-consideration-indian-ma/), not merely regulatory compliance, and this is an area where market practice is likely to keep developing quickly. ## 8. The “roll or sell” decision requires better disclosure A continuation transaction usually gives existing investors a choice between taking cash now and continuing to invest in the asset through the new vehicle. That choice is more complicated than it first appears. An investor deciding whether to roll needs to understand the valuation of the transferred asset, the new vehicle’s economics, management fees, carried interest, the remaining investment horizon, projected liquidity, dilution, governance rights, future capital commitments and the economics available to new investors. A sophisticated GP-led transaction therefore requires investors to receive enough information to make an informed decision. Disclosure quality matters especially because an LP may not have the same information as the GP about the underlying company’s future prospects. The documentation should draw a clear line between marketing the continuation opportunity and giving investors the information needed to evaluate it, and that distinction will become more important as the market develops. ## 9. The 25% diversification question One structural challenge for Indian continuation vehicles is the AIF diversification framework. For many Category I and Category II AIF structures, investment in a single investee company is subject to a 25% limit of investable funds, subject to applicable exceptions and the special treatment available to certain Large Value Funds. That can make the classic international single-asset continuation vehicle difficult to replicate in a conventional domestic AIF structure. The problem is simple to state. A global GP may want to create a new vehicle holding one highly valuable portfolio company, but if the new Indian vehicle is subject to a diversification requirement, the single-asset structure may not fit comfortably within the domestic AIF framework. This raises a real structuring question for Indian fund managers: whether the continuation vehicle should be structured domestically, through a different regulatory architecture, or in an IFSC or other jurisdiction where the desired economics can be accommodated. There is no universal answer; the appropriate structure depends on the investor base, asset, tax profile, foreign-investment implications and regulatory requirements. The point is that the legal structure can determine the commercial feasibility of the transaction. ## 10. GIFT IFSC could become an important part of the secondary-market story As the domestic continuation-fund market develops, the International Financial Services Centre at GIFT City is likely to receive more attention. IFSC structures can offer greater flexibility for international private-capital strategies and an alternative platform for certain secondary and continuation transactions, subject to the applicable regulatory, tax and investment rules. For Indian fund managers, this creates a strategic structuring decision, because a continuation transaction involving an Indian portfolio asset does not have to be treated as a conventional domestic AIF transaction from beginning to end. The relevant question becomes where the continuation vehicle should sit, and it should be examined together with investor location, tax residence, FEMA, asset location, AIF and IFSC regulation, sectoral restrictions, transfer pricing, valuation, withholding, fund administration and future exit. As India’s private-capital ecosystem becomes more sophisticated, jurisdictional structuring is likely to become an increasingly important part of secondary-market advice. ## 11. FEMA adds another layer to cross-border secondaries Cross-border secondaries can be particularly complex because the transaction may involve a non-resident buyer, a non-resident seller, an Indian fund, an Indian portfolio company or an offshore continuation vehicle. The pricing analysis under India’s [foreign-exchange framework](https://ksandk.com/practice-areas/fdi-in-india/) then becomes important. Where securities are transferred between residents and non-residents, the applicable pricing rules must be considered alongside sectoral restrictions and reporting requirements. This creates a tension between two concepts of value. The secondary market may set a negotiated price based on expected future performance, liquidity discounts and investor-specific considerations, while FEMA may require the transaction to satisfy a prescribed valuation framework, and the two are not necessarily identical. A secondary transaction should therefore not begin with what price the buyer will pay. It should begin with what price is legally available and how that interacts with the commercial price, and that analysis should happen before the transaction is documented. ## 12. Competition law cannot be ignored Continuation transactions can also raise competition-law questions. An internal transfer from one fund managed by a sponsor to another vehicle controlled by the same sponsor may look like a simple restructuring, but [merger-control analysis](https://ksandk.com/practice-areas/competition-law-firm/merger-control-advisory-law-firm/) is concerned with the acquisition of control, assets, rights and economic interests, not merely with whether the same sponsor remains involved. The Competition Commission of India has considered the treatment of internal fund restructurings and continuation structures under the applicable combination framework, including the use of exemptions where there is no change in control and no acquisition of new rights. The analysis should therefore be conducted transaction by transaction, and it is particularly important for large assets in sectors where the underlying company already has substantial market presence. “Same sponsor” does not mean “no competition-law analysis.” ## 13. Tax can determine whether the structure works Secondary transactions carry a substantial tax dimension. The consequences differ depending on whether the transaction involves an LP selling fund units, a fund selling portfolio securities, a continuation vehicle acquiring an asset, a foreign investor selling to another foreign investor, an Indian resident selling securities to a non-resident, an asset transfer within an investment-fund structure, or a restructuring preceding an eventual exit. The [tax analysis](https://ksandk.com/practice-areas/tax-law-firm/) can move the economics enough that it should not be left to the end of the transaction. This is especially true for continuation vehicles, where the parties are creating a new economic relationship around an existing asset. The transaction should be analysed not only for the immediate tax liability but for the tax consequences of the new holding structure over the remaining investment period. ## 14. Fund documents need to anticipate secondaries The growth of the secondary market exposes a limitation in many legacy fund documents. Traditional documentation may contemplate transfer of LP interests, fund extensions, liquidation, portfolio exits and ordinary conflicts, but not the detailed mechanics of a sophisticated GP-led continuation transaction. Questions then arise around valuation, investor consent, information rights, conflicted investors, roll-over elections, treatment of carry, transaction expenses, extension periods, management fees, key-person provisions, liability allocation and governance of the new vehicle. As continuation transactions become more common, future fund documents are likely to include much more explicit provisions on these issues. The secondary market will therefore influence not only transactions after funds are established, but how future funds are documented at inception. ## 15. The GP’s economics need particular attention A continuation transaction can materially change a GP’s economics. The GP may receive continued management fees, new carried interest, transaction fees, an extension of the investment period and a new performance-measurement period. These create legitimate commercial incentives, but they can also intensify the conflict between the GP’s interests and those of existing investors. A GP may prefer to move an asset into a continuation vehicle rather than sell it to a third party because the continuation structure lets it retain management economics. That does not make the transaction inappropriate, but it does mean investors should understand the economics. A well-structured transaction should make clear what the GP receives, what existing investors receive, what new investors receive, and how those economics compare with the alternatives reasonably available to the fund. Transparency here is likely to become an increasingly important market standard. ## 16. Continuation funds can also solve a genuine investment problem Continuation vehicles are not only a way to extend fund life; there is a legitimate investment rationale. A portfolio company may have strong earnings growth, significant expansion opportunities, a path toward an IPO, a transformation or strategic-acquisition opportunity, or a valuation inflection point that has not yet materialised. A GP may reasonably believe that selling the company today would leave substantial value on the table. The continuation structure lets the GP separate the fund’s need for liquidity from the company’s need for additional time, which can align the interests of different categories of investors. The challenge is ensuring the mechanism does not become a means of transferring value from one investor group to another, which is ultimately a governance question. ## 17. India needs a deeper secondary-market infrastructure The next stage of development requires more than individual transactions; India needs a deeper ecosystem around secondaries. That includes specialised secondary funds, institutional buyers, valuation advisers, investment banks, legal advisers, fund administrators, data providers, independent directors and governance advisers, LP advisory committees and clearer market conventions. The market also needs greater price discovery. Unlike listed markets, private-market secondaries have no transparent real-time pricing: a GP may know the asset extremely well, a selling LP may have limited information, and a new investor may apply a completely different valuation methodology. That makes independent information and credible transaction processes especially valuable. The development of a secondary market depends not only on regulatory permission but on market infrastructure that creates trust between buyers, sellers, GPs and LPs. ## 18. What should fund managers do now? Fund managers should not wait for a portfolio asset to reach the end of its fund life before considering secondary options. A more sophisticated approach builds exit optionality several years before the anticipated liquidity event, which means periodically assessing the remaining fund life, asset maturity, potential strategic buyers, IPO readiness, sponsor-to-sponsor appetite, secondary-market interest, continuation-fund feasibility, investor preferences and regulatory constraints. This materially improves the manager’s bargaining power. A GP with only one available exit route negotiates from weakness, while a GP that can credibly consider an IPO, a strategic sale, a secondary transaction or a continuation vehicle has far greater structural flexibility. The secondary market is not simply an exit market; it is an optionality market. ## 19. What should LPs be asking? The rise of continuation vehicles requires LPs to become more sophisticated too. When presented with a continuation transaction, an LP should ask more than what the proposed valuation is. It should ask what alternatives were considered, why the asset is being transferred and why now, how the valuation was determined and whether there was an external process, what fees and carry the new vehicle will charge, what economics the GP will receive, who the new investors are and which existing investors are rolling, what information was provided, and what happens if the LP chooses cash rather than rolling, including the expected remaining holding period. The legal documentation should let the LP answer these questions. That is the essence of informed consent. ## 20. The legal adviser is becoming a process adviser The evolution of secondaries is changing the role of private-capital counsel. In an ordinary transaction, lawyers mainly document an agreed commercial deal. In a continuation transaction, the lawyer may be involved much earlier, in designing the process itself, advising on transaction structure, regulatory route, conflicts, investor-consent thresholds, disclosure, the valuation process, information rights, fund-document amendments, tax architecture, competition law, FEMA, transaction documentation and closing mechanics. That is a different role. The lawyer is no longer only documenting a transaction; the lawyer is helping design the governance architecture through which the transaction can be regarded as fair, transparent and legally defensible. ## 21. The KSK perspective: building India’s secondary-capital infrastructure For King Stubb & Kasiva, India’s secondary market is a natural extension of its private-capital and M&A capabilities, because a sophisticated secondary transaction requires combining fund regulation with transactional execution. KSK’s role runs across fund and AIF regulation, advising sponsors on the regulatory architecture for continuation vehicles, fund extensions, investor consent and conflicted transactions; secondary transactions, structuring LP-led and sponsor-led secondaries, sponsor-to-sponsor transactions and primary-plus-secondary financings; and M&A, advising on portfolio-company transfers, strategic sales and transactions involving existing investors. It also runs across FEMA and cross-border structuring, addressing foreign investors, pricing, downstream investment, beneficial ownership and cross-border transfers; competition law, assessing whether a continuation or secondary transaction requires analysis under the Indian merger-control framework; tax, integrating tax into the transaction architecture rather than treating it as a post-structuring exercise; and governance, designing investor-consent processes, conflict-management mechanisms and disclosure frameworks. The opportunity is broader than advising on individual secondary sales; it is to help build the legal infrastructure for India’s secondary private-capital market. ## 22. The market is moving from “exit” to “choice” The most important change may be conceptual. The traditional private-equity model assumed a linear lifecycle: raise a fund, invest, create value, exit and distribute proceeds. The secondary market introduces optionality at the liquidity stage, so that after creating value a manager can sell, partially sell, continue, restructure or transfer. That additional choice can create substantial value, but it also creates complexity, because every additional route introduces questions of valuation, conflicts, governance, regulation and investor protection. India’s challenge over the coming years is to develop a framework that lets private capital become more liquid without weakening the protections expected of a regulated investment ecosystem. SEBI’s continuing work on AIF governance, conflicted transactions and investor consent is directly relevant to that evolution. ## Conclusion India has spent two decades building a private-capital market capable of attracting and deploying substantial institutional capital. The next stage is about enabling that capital to move. The emergence of LP-led secondaries, sponsor-to-sponsor transactions and continuation vehicles reflects a deeper and more mature private market, and it reflects a basic economic reality: a valuable company may need more time to grow even when the fund that owns it needs liquidity. Continuation funds offer a way to reconcile those two objectives. Their success will depend on more than transaction structuring. The market will need credible valuation processes, meaningful investor consent, transparent disclosure, disciplined conflict management and regulatory frameworks capable of accommodating increasingly sophisticated transactions. For fund managers, the strategic question is no longer only how to exit an investment but how to create multiple credible pathways to liquidity. For LPs, it is how to evaluate those pathways with enough information to make an informed choice. For regulators, it is how to enable innovation without weakening investor protection. And for legal advisers, the opportunity is to move beyond documenting exits and help design the governance and regulatory structures that make new forms of liquidity possible. The Indian secondary market is still developing, but the direction is clear: the next evolution of Indian private capital will be defined not only by how companies are funded, but by how intelligently investors can move between ownership, liquidity and continued participation. *Last Updated on 22 September, 2026* Get King Stubb & Kasiva’s legal updates in your Google feed[![Add King Stubb & Kasiva as a preferred source on Google](https://ksandk.com/wp-content/uploads/google_preferred_source_badge_light_en@2x.png)](https://www.google.com/preferences/source?q=https://ksandk.com/) --- ## Office Locations - [New Delhi](https://ksandk.com/locations/top-corporate-law-firm-in-delhi/) (HQ): +91-11-41318190 | info@ksandk.com - [Mumbai](https://ksandk.com/locations/top-corporate-law-firm-in-mumbai/): 3 offices (Nariman Point, Lower Parel, Andheri) | mumbai@ksandk.com - [Bangalore](https://ksandk.com/locations/top-corporate-law-firm-in-bangalore/): bangalore@ksandk.com - [Chennai](https://ksandk.com/locations/chennai/): chennai@ksandk.com - [Hyderabad](https://ksandk.com/locations/hyderabad/): hyderabad@ksandk.com - [Pune](https://ksandk.com/locations/pune/): pune@ksandk.com - [Kochi](https://ksandk.com/locations/kochi/): kochi@ksandk.com ## Contact - [Contact Page](https://ksandk.com/contact-us/) - General: info@ksandk.com | +91-11-41318190 - WhatsApp: +91-7428567444 - [Privacy Statement](https://ksandk.com/privacy-statement/) - [Terms of Use](https://ksandk.com/terms-of-use/)