Sebi mulls mandating additional disclosure for high-risk FPIs
Sebi noted that some FPIs have been observed to concentrate a substantial portion of their equity portfolio in a single investee company/company group.
NEW DELHI: To bring greater transparency in the Indian capital markets, Sebi on Wednesday came out with a proposal mandating enhanced disclosures from high-risk Foreign Portfolio Investors (FPIs) that have concentrated holding in a single company or a group firm.
These proposals are aimed at preventing possible circumvention of minimum public shareholding (MPS) requirements and potential misuse of the FPI route to guard against the inherent risks of opportunistic takeover of Indian companies, Sebi said in its consultation paper.
The proposal has its genesis in the Adani stocks issue where Sebi could not identify the beneficial owners of some foreign portfolio investments in Adani stocks since the existing regulations are lax in identifying the true owners of many investments.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said, under the proposal, the regulator said that high-risk FPIs with concentrated single group equity exposures or significant equity holdings will be mandated to provide additional granular disclosure. They would be required to identify all entities with any ownership, economic interest and control rights.
“Such FPIs shall be required to provide granular data of all entities with any ownership, economic interest, or control rights on a full look–through basis, up to the level of all natural persons and/or public retail funds or large public listed entities,” it said. Sebi noted that some FPIs have been observed to concentrate a substantial portion of their equity portfolio in a single investee company/company group. “Such concentrated investments raise the concern and possibility that promoters of such corporate groups, or other investors acting in concert, could be using the FPI route for circumventing regulatory requirements such as that of maintaining Minimum Public Shareholding. If this were the case, the apparent free float in a listed company may not be its true free float, increasing the risk of price manipulation in such scrips,” Sebi said.
It has been proposed that high-risk FPIs, holding more than 50 per cent of their equity Asset Under Management in a single corporate group, would be required to comply with the requirements for additional disclosures.