MUMBAI: The market regulator Securities and Exchange Board (Sebi) is likely to clear a raft of reforms/relaxations for market participants at the board meeting this Wednesday.
This is the second board meeting under the chairmanship of Tuhin Kanta Pandey, who took charge on February 28 and is steading the regulatory boat that was rocked many a time under the previous chair Madhabi Puri Buch.
Among the key regulatory relaxations include aligning Sebi’s KYC norms with those of the RBI, making investing in government securities easier for foreign funds and retail investors including residents and NRIs, voluntary delisting for public sector companies with public low-float wherein say the government still owns more than 90%, and facilitating co-investments in alternative investment funds through a separate co-investment vehicle among others, tightening of SME listing norms, according to a Sebi watcher.
The source said the regulator is likely to offer easier compliance norms for foreign portfolio investors (FPIs) by introducing a new category for them called government of India bonds–IGB-FPIs, for investing in G-secs through voluntary retention route and fully accessible route by easing KYC norms by aligning the same with the RBI’s KYC norms.
Another move on the G-secs front is likely to allow overseas citizens of India, NRIs and local residents without any caps.The board is also expected to discuss co-investment opportunities for alternate investment funds (AIFs) at its next board meeting. Also on the agenda is the demerger or an ownership cap for clearing corporations by stock exchanges.
The board is further expected to weigh in on tighter regulations for SME listings.The definition of qualified institutional buyers (QIBs) could be broadened to include accredited investors by removing the 200-investor cap for private placement offers and ease the paper work for qualified institutional placements so as to reduce the timeframe and effort for preparing the placement document.
A reclassification of the real estate investment trusts (Reits) and infrastructure investment trusts (Invits) as equity is also on cards along with a higher investment limit for mutual funds in Reits and Invits.
The proposal for a separate delisting mechanism for public sector units, including a fixed premium over the floor price and relaxation of the two-thirds public shareholder approval requirement, is a significant departure from the current framework under the Sebi’s delisting regulations. If done this can expedite the delisting process for government companies.
The move to tighten SME listing norms may see Sebi extending the promoter’s lock-in period, raising operational profit thresholds, and enhancing disclosure norms.
These changes are likely to raise the bar for SME listings, which has seen a lot of mucks in recent past, ensuring only credible and sustainable businesses access public markets. Amendments to employee stock options (Esops) to help the founders of startups retain the Esops even after IPO is also likely.
Also, on cards is a separate delisting mechanism for voluntary delisting of government companies. Sebi had floated a consultation paper on the same.
Many state-run companies have low public shareholding, as low as just 3% in even in large companies like LIC and under 10 per cent in some banks, outdated business models or weak future outlook and higher market prices due to low free float, which is financially burdensome for the government to delist.
Due to these drawbacks and to facilitate delisting of such companies, Sebi has proposed that a separate carve-out for voluntary delisting should be created.
Another key proposal that will get the greenlight is the demerger of clearing corporations from exchanges so that clearing corporations become independent and exchanges don’t have to infuse capital. But exchanges have a different view from Sebi and want the existing structure to continue.
Source: The New Indian Express
