SEBI tightens disclosure requirements for FPIs, reduces IPO timeline
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The Securities and Exchange Board of India (Sebi) on Wednesday tightened the disclosure requirements for foreign portfolio investors (FPIs) in a bid to get a better handle on them and prevent the possible circumvention of minimum public shareholding (MPS) and takeover norms.
The Sebi board also approved reducing the time period for the listing of shares in public issues from the existing six days to three days from the date of issue closure. It, however, deferred a decision on overhauling cost structures, or the so-called total expense ratio (TER), for the Rs 43-trillion mutual fund (MF) industry. The markets regulator mandated additional granular disclosures regarding ownership, economic interest, and control of FPIs who have more than half of their holdings in a single corporate group or hold equity assets of more than Rs 25,000 crore. Some entities such as sovereign funds, public retail funds, and exchange-traded funds (ETFs) have been exempted from making additional disclosures.
Existing FPIs now have three months to bring down their single-group exposure to 50 per cent or comply with additional disclosure requirements.
“Exemptions have been given to several entities…There could be a relatively small number of FPIs who would be required to make this additional disclosure,” Sebi Chairperson Madhabi Puri Buch told a press conference after the board meeting.
The changes approved by the Sebi board were proposed in a discussion paper in May amid a controversy around “opaque structures” of FPIs holding shares of Adani group firms. The allegations were levelled by US-based Hindenburg Research in a report in January.
In the paper, Sebi had estimated that FPI assets worth Rs 2.6 trillion, or 6 per cent, of their outstanding equity exposure in India could be impacted by the new rule.
In another key reform, the Sebi board shortened the timeline for initial public offerings (IPOs). Going ahead, a company coming out with an IPO will be able to list on the bourses in just three days after the closure of the issue.
The Sebi board also approved reducing the time period for the listing of shares in public issues from the existing six days to three days from the date of issue closure. It, however, deferred a decision on overhauling cost structures, or the so-called total expense ratio (TER), for the Rs 43-trillion mutual fund (MF) industry. The markets regulator mandated additional granular disclosures regarding ownership, economic interest, and control of FPIs who have more than half of their holdings in a single corporate group or hold equity assets of more than Rs 25,000 crore. Some entities such as sovereign funds, public retail funds, and exchange-traded funds (ETFs) have been exempted from making additional disclosures.
Existing FPIs now have three months to bring down their single-group exposure to 50 per cent or comply with additional disclosure requirements.
“Exemptions have been given to several entities…There could be a relatively small number of FPIs who would be required to make this additional disclosure,” Sebi Chairperson Madhabi Puri Buch told a press conference after the board meeting.
The changes approved by the Sebi board were proposed in a discussion paper in May amid a controversy around “opaque structures” of FPIs holding shares of Adani group firms. The allegations were levelled by US-based Hindenburg Research in a report in January.
In the paper, Sebi had estimated that FPI assets worth Rs 2.6 trillion, or 6 per cent, of their outstanding equity exposure in India could be impacted by the new rule.
In another key reform, the Sebi board shortened the timeline for initial public offerings (IPOs). Going ahead, a company coming out with an IPO will be able to list on the bourses in just three days after the closure of the issue.
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