LEGAL & REGULATORY

Risk Disclosure & Legal Information

Last updated: May 2026

⚠️ CRITICAL RISK WARNING

PRE-IPO INVESTMENTS ARE HIGH-RISK, ILLIQUID SECURITIES FOR ACCREDITED INVESTORS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Some of our portfolio companies have achieved successful IPOs or acquisitions. However, approximately 30% of pre-IPO companies fail to achieve liquidity events, resulting in partial or total loss of invested capital.

1. Investment Risks
2. Regulatory Status
Direct agreements with issuers (no pooling)
3. Fee Structure & Conflicts
4. Investor profile
5. Lock-In & Liquidity
6. Independent Decision Making
7. Tax Implications
8. Complaint Redressal

1. Investment Risks

A. Business & Company Risk

Pre-IPO companies are typically early to mid-stage businesses that have not yet completed an IPO or acquisition. They face significant business risks including:

•Failure to achieve business milestones or revenue targets
•Loss of key employees, including founders and management
•Competition from other companies in the same sector
•Regulatory changes affecting the company's business model
•Technology obsolescence or disruption
•Customer concentration risk (over-reliance on few customers)
•Supply chain disruptions
•Market downturns affecting demand for the company's products/services
•Inability to raise additional capital when needed
•Company failure resulting in total loss of invested capital

B. Illiquidity Risk (CRITICAL)

Pre-IPO shares are HIGHLY ILLIQUID. Key illiquidity issues:

•No public market: Pre-IPO shares cannot be traded on stock exchanges
•Restricted transfers: Sale of shares may be restricted under shareholders' agreements
•Limited buyers: Few investors are willing to purchase unlisted shares
•Valuation uncertainty: Without a public market, valuation is subjective
•Forced holding period: You may be forced to hold shares for 3-7+ years
•No secondary market: Cannot easily exit if circumstances change
•Emergency access impossible: Cannot liquidate to meet unexpected financial needs

C. Failure to Achieve IPO/Acquisition (~30% Risk)

Approximately 30% of pre-IPO companies FAIL to achieve a liquidity event (IPO or acquisition). In such cases:

•Your shares remain locked in an unlisted company indefinitely
•You may never realize returns on your investment
•The company may eventually be dissolved, resulting in total loss
•Minority shareholders may have limited rights or influence
•Down rounds (subsequent fundraising at lower valuations) may dilute your stake

D. Market & Timing Risk

Even if a company is fundamentally sound, external factors can impact exit outcomes:

•IPO market cycles: Markets may be unfavorable when the company is ready to list
•Valuation risk: IPO price may be significantly lower than private valuations
•Lock-in period post-IPO: Investors typically cannot sell for 6-12 months after IPO
•Market correction: Public market downturn could depress IPO valuations
•Interest rate changes: May reduce appetite for growth-stage IPOs
•Sector sentiment: Sector rotations may impact IPO reception

E. Valuation Risk

Valuation of private companies is subjective and may differ significantly from public market valuations:

•Private company valuations are often inflated compared to public company multiples
•Adjustments for illiquidity, lack of audited data, and risk are typically applied at exit
•Dilution: Subsequent funding rounds may issue shares at lower valuations
•Down rounds: Later rounds may value the company lower than your entry price
•Writedowns: At IPO, company valuation may be significantly lower than private valuation

F. Information Risk

Unlisted companies provide limited public information:

•Limited audited financial statements
•No quarterly earnings reports
•No regulatory stock exchange filings until DRHP/RHP stage
•Limited analyst coverage
•Restricted access to management (NDA constraints)
•Cannot easily verify claims or conduct independent analysis

G. Regulatory & Legal Risk

Changes in laws or regulations can significantly impact companies:

•New regulations may require companies to pivot business models
•Tax law changes may impact valuations
•Antitrust actions may force company breakup or sale
•Data privacy regulations (DPDP Act) may increase costs
•Foreign ownership restrictions may limit exit opportunities
•Defence/sector-specific regulatory uncertainty

H. Shareholder Rights Risk

As a minority pre-IPO investor, your rights are limited:

•Limited voting rights on major decisions
•No board representation (usually)
•Founders may have super-voting rights
•Preference shares may have different rights than common shares
•Disputes may be difficult to resolve outside of courts
•Conversion rights may be unfavorable to minority shareholders

I. Concentration Risk

A pre-IPO portfolio offers limited diversification:

•Limited number of companies (concentration risk)
•Single sector concentration (e.g., overweight defence or solar)
•Geographic concentration (primarily India-based companies)
•Stage concentration (SME IPO and pre-IPO stage)
•Inability to rebalance without realizing losses (illiquidity)

J. Fraud & Misrepresentation Risk

Private company disclosures are less regulated than public companies:

•Financial statements may not be independently audited
•Management may misrepresent financial performance
•Due diligence is limited compared to a full IPO process
•Incentive to inflate metrics or valuations exists
•Limited recourse if fraud is discovered post-investment

2. Regulatory Status & Disclaimers

VYOM CAPITAL IS NOT SEBI REGISTERED

Vyom Capital is NOT registered with SEBI in any intermediary category (including roles commonly described as investment research, portfolio management, or pooled fund management). We operate as a deal facilitator only.

DIRECT AGREEMENTS WITH ISSUERS

Each investor enters into a direct, individual share-purchase or share-subscription agreement with the issuer company. Vyom Capital is not a counterparty, custodian, or trustee in any transaction. There is no common pool, common bank account, or common scheme of any kind.

WHAT WE DO NOT DO

✗Manage investor funds or pool capital
✗Charge investors facilitation or management fees
✗Provide personalized buy/sell recommendations on specific securities
✗Represent that returns are assured or predictable
✗Have investment discretion over investor portfolios
✗Maintain investor accounts or hold securities
✗Provide ongoing portfolio management

WHAT WE DO

✓Facilitate introductions between investors and pre-IPO companies
✓Conduct due diligence on companies seeking capital
✓Provide research and information to inform investor decisions
✓Charge companies (not investors) facilitation fees
✓Monitor portfolio companies post-investment
✓Provide limited ongoing updates and reporting

SEBI COMPLAINT PROCESS

If you have concerns, you may file complaints with:

Email: investors.sebi@sebi.gov.in

Toll-Free: 1800-22-7575

Website: https://www.sebi.gov.in

SEBI will not provide personalized guidance on specific securities but will investigate potential violations of securities laws.

3. Fee Structure & Conflict of Interest

COMPANY FEES

We charge the pre-IPO companies a deal facilitation fee. These fees are paid by the company, not by investors.

INVESTOR FEES

ZERO — No management fees, transaction fees, or any other charges to investors. Your investment goes directly into the company.

⚠ MATERIAL CONFLICT OF INTEREST

Because we earn fees from companies seeking capital, our interests may NOT always align with investor interests. Specifically:

•We earn MORE fees if we facilitate LARGER capital raises (incentive to push high valuations)
•We earn fees from the COMPANY, not from investor returns (no direct incentive tied to good exits)
•We may facilitate investments in companies where due diligence is insufficient
•We may not adequately disclose company risks if it would reduce deal flow

Mitigation: We disclose this conflict transparently. You should independently evaluate every opportunity and conduct your own due diligence.

4. Investor profile

PRE-IPO MAY ALIGN IF YOU:

✓Are an accredited investor (as defined under Indian law)
✓Have sufficient net worth/income to invest ₹25 lakhs – ₹1 crore
✓Have a 5+ year investment horizon (minimum)
✓Can afford to lose 100% of invested capital
✓Have high risk tolerance
✓Have a diversified portfolio (not over-concentrated)
✓Understand and accept illiquidity constraints
✓Make independent investment decisions
✓Have knowledge/experience with early-stage/high-risk investments

PRE-IPO MAY NOT ALIGN IF YOU:

✗Are not an accredited investor
✗Need liquidity within 5-7 years
✗Cannot afford to lose your entire investment
✗Have low risk tolerance
✗Are near retirement or have immediate capital needs
✗Rely on this investment for income
✗Require contractually fixed or predictable returns
✗Lack investment knowledge or experience
✗Are seeking quick returns or 'get rich quick'

ACCREDITED INVESTOR DEFINITION (INDIA)

In India, accredited investors typically include: (1) individuals with net income of ₹25 lakh+ per annum in the past 2 years, (2) individuals with net worth of ₹5 crore+, (3) HUFs, (4) registered companies, (5) registered LLPs, (6) registered partnerships, (7) trust entities, (8) family offices, (9) mutual funds, (10) qualified institutional buyers. Definitions vary by regulatory context. Consult your tax and legal professionals.

5. Lock-In Periods & Liquidity Constraints

Initial Lock-In: 3-7 years (typical)

You typically cannot sell or exit during this period

Post-IPO Lock-In: 6-12 months (additional)

Even after company goes public, shareholders have lock-in periods

Total Hold Period: 4-8+ years (average)

From initial investment to ability to freely sell public shares

CONSEQUENCES OF ILLIQUIDITY

•Cannot access capital: If you need funds for emergencies, you cannot sell
•Opportunity cost: Capital is tied up during strong bull markets
•No rebalancing: Cannot adjust portfolio allocation due to illiquidity
•Forced holding: Contractually obligated to hold even if company underperforms
•Valuation uncertainty: No market price to reference until exit
•Dividend constraints: Unlisted companies rarely pay dividends

Reality: You Will Likely Be Locked In

In practice, it is very difficult to sell pre-IPO shares before a liquidity event. You should invest only in capital you can afford to completely forget about for 5-7+ years.

6. Independent Decision Making

WE DO NOT PROVIDE PERSONALIZED PRODUCT RECOMMENDATIONS. We provide research and factual information only. All investment decisions must be made independently by you.

YOUR RESPONSIBILITIES

✓Conduct your own due diligence
✓Read all company documents thoroughly
✓Consult a legal advisor on shareholder agreements
✓Consult a tax advisor on investment tax implications
✓Consult an investment professional before allocating capital
✓Assess management quality and background
✓Evaluate competitive landscape and market opportunity
✓Make your decision free from pressure or influence

WHAT WE CANNOT HELP WITH

✗Whether you should invest
✗How much you should invest
✗Portfolio allocation recommendations
✗Tax or legal guidance
✗Negotiation of investment terms
✗Representing assured investment outcomes
✗Ongoing investment management

7. Tax Implications

Tax treatment of pre-IPO investments is complex and varies based on individual circumstances. Below is general information only. You MUST consult with a qualified CA or tax advisor.

Short-Term Capital Gains (STCG)

If shares are sold within 24 months of purchase, gains are taxed as income at applicable slab rates (up to 42.7%)

Long-Term Capital Gains (LTCG)

If shares held for 24+ months, LTCG tax applies at 10% for gains above ₹1 lakh (plus surcharge and cess)

Dividend Income

Unlisted company dividends (if any) are taxed as income

Section 56(2)(x) Tax

If you receive shares at below-market price, this may trigger gift tax on the differential

TDS

Depending on company structure, Tax Deduction at Source may apply to payments

Loss Carryforward

Pre-IPO investment losses may be carried forward to offset future gains

8. Complaint Redressal & SEBI Oversight

SEBI INVESTOR GRIEVANCE CELL