Give me your opinion of our current portfolio. Meruvale Ventures Fund II reports a TVPI of almost 2.9x, but three of its biggest marks date from 2021 and one company is nearly out of cash. What is a defensible NAV?

Three marks are stale and one is a write-off; a defensible NAV is about Rs 684 crore, taking TVPI from 2.88x to about 1.71x. Companies 1, 2 and 4 are carried at 2021 multiples of 25x to 40x ARR against 9x today, and their growth does not close the gap. Company 7 has four months of cash and no buyer, so its Rs 40 crore should go to zero until a round says otherwise.

Think of a flat valued at the price its neighbour sold for three years ago, in a building where prices have since fallen by half. Nobody has lied, but nobody would lend against that number. A venture mark usually equals the price of the company's last round, so the older the round and the bigger the market move since, the less the mark says about today. Ask two questions of every line: when was it last priced, and at what multiple. Here companies 1, 2 and 4 hold Rs 770 crore, two thirds of the NAVNet asset value: what the fund itself estimates its unsold holdings are worth today., on 2021 prices.

Scale the mark by what has changed: ARR growth times the ratio of today's multiple to the old one. Company 1 has grown 2.0x but the multiple has fallen from 40x to 9x, so its value is 2.0 times 9 over 40, 0.45 of the mark. A company can double its revenue and still be worth less than half its last round, because the 2021 multiple was doing most of the work. Company 2 lands at 0.45 of its mark as well, and company 4, with the weakest growth, at 0.432.

The fund has returned nothing, so its whole value is NAV: TVPITotal value to paid-in capital: distributions plus remaining NAV, divided by the money investors have put in. falls from 2.88x to 1.71x on Rs 400 crore invested. The fund is still ahead of its money, but it has gone from a top-quartile story to an ordinary one, and company 1 alone accounts for more than half of the drop. That is the sentence to lead with, because it tells the partner where the risk sits.

Name the limits of the method. Scaling by multiples ignores the fund's preference rights: a fund holding a 1x preference in company 1 may recover more than a pro rata share in a weak sale, so the preferred stake falls less than the company does. And the write-off of company 7 is a judgement; a bridge from insiders would put some value back. A defensible NAV is a range with a stated method, not a single number defended to the decimal.