The team deployed two life rafts some 50 feet from the boat to abandon ship.
The Volvo Ocean 65 sloops have watertight bulkheads in the bow and the stern.
The rest of the boat was intact, including the rig.The shoals are some 1360 kilometers (850 miles) east of Madagascar.
Danish-based Team Vestas Wind is skippered by Australian Chris Nicholson, who has two runner-up finishes in the Volvo Ocean Race, with PUMA Ocean Racing in 2009 and CAMPER in 2012.
There was no immediate word on what caused the accident or the weather conditions at the time.
Race CEO Knut Frostad said the first priority was the crew's safety.
The boat will be evaluated during daylight.
But he said the location is some 320 kilometers (200 miles) from a population base.
He said the forecast for the next 24 hours was good.
"However, it's obviously a complex and serious situation for Team Vestas Wind and the race.
"Team Vestas Wind was in fifth place on the second leg, from Cape Town to Abu Dhabi, when the accident happened.
Frostad said Team Alvimedica can seek to be compensated in the race standings for the time it has used to assist Team Vestas Wind.
The Volvo Ocean Race began Oct. 11 from Alicante, Spain, and will end in Gothenburg, Sweden, in June. It will cover 38,739 nautical miles.
Volvo Ocean Races crews are never far from danger.
In May 2006, Dutch sailor Hans Horrevoets died after being swept off the deck of ABN AMRO TWO in the North Atlantic.
The crew turned back and pulled him out of the water but couldn't resuscitate him.
Three days later, with Horrevoets' body still aboard, ABN AMRO TWO responded to a distress call from rival Movistar of Spain and rescued its 10-man crew.
In the race's last edition, the mast on U.S.-based Puma Ocean Racing's Mar Mostro snapped in the South Atlantic, forcing the sloop to drop out of opening leg and limp to the remote island of Tristan da Cunha to await a ship that transported it to Cape Town.
_AAP