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Private Markets Intelligence
How to Model a Startup Exit Waterfall: A Step-by-Step Guide for Indian Founders
An exit waterfall is a calculation that distributes the proceeds from a company's sale or acquisition among its shareholders, in the order determined by each shareholder's rights and preferences. For Indian startups that have raised institutional funding through CCPS, the waterfall involves multiple layers: preference payouts, participation distributions, conversion decisions, and common equity allocations. Modelling the waterfall before a funding round, rather than after, gives founders an acc
Anti-Dilution Provisions in Indian Startups: Full Ratchet vs Broad-Based Weighted Average
Anti-dilution provisions are a standard feature of CCPS terms in Indian institutional funding rounds. They protect investors when a company raises a future round at a lower price per share than the investor originally paid. When triggered, they adjust the conversion ratio of the investor's CCPS, giving the investor more equity shares at conversion than originally agreed. This post explains how anti-dilution provisions work, the two main mechanisms used in Indian VC, how each one affects the cap
Stacked vs Pari-Passu Liquidation Preferences in Indian Startups: How Seniority Affects Your Exit
When a startup raises multiple rounds of institutional funding, each new round typically introduces a new series of CCPS with its own preference terms. The relationship between those series, specifically the question of whether they rank equally or whether later-round investors take priority over earlier ones, is called the seniority structure. Seniority structure determines the order of the preference payout in the exit waterfall. It is a term that founders rarely negotiate explicitly in early
CCPS vs Equity Shares in Indian Startups: How Investor Share Structure Affects Your Exit
When Indian startups raise institutional funding, investors almost never take ordinary equity shares. They take Compulsorily Convertible Preference Shares, commonly known as CCPS. Understanding why investors use CCPS, what rights the instrument carries, and how those rights affect the distribution of exit proceeds is foundational knowledge for any founder negotiating a funding round. This post explains how CCPS works under Indian corporate law, how it differs from equity shares, what rights it
What Is a Liquidation Event? How Indian Startups Define It in Their SHA
In Indian startup financing, the liquidation preference clause determines how exit proceeds are distributed among shareholders. But the liquidation preference clause only activates when a liquidation event occurs. The definition of that term, embedded in the shareholders' agreement (SHA), controls everything downstream: when the waterfall runs, which investor rights are triggered, and whether founders and employees receive any proceeds at all. This post explains what a liquidation event is unde
How to Transfer Unlisted Shares in India during a Secondary Sale?
Secondary share transfers in India follow a five-step legal process: 1. Execute a Share Purchase Agreement (SPA) between buyer and seller 2. Complete Form SH-4 (the official transfer deed) 3. Pay stamp duty as per state rates 4. Submit documents to the company for Board approval 5. Obtain certificate endorsement and Register of Members update. The complete process takes 10-14 weeks for standard transactions with cooperative parties and clean documentation. Board approval under Section 58
How Are Secondary Share Sales Taxed in India?
Secondary share sales trigger capital gains tax for sellers, calculated as the difference between sale price and original acquisition cost. Short-term capital gains (holding ≤24 months) are taxed at slab rates up to 30%, while long-term capital gains (holding >24 months) are taxed at 12.5% without indexation. Buyers face Section 56(2)(x) deemed income tax if purchasing below Fair Market Value determined under Rule 11UA. In 2025, the average ESOP secondary sale generated ₹15 lakh in proceeds with