Seeking to deepen capital markets, regulator Sebi on Friday offered direct entry to well-regulated foreign investors for investing in corporate bonds and relaxed the norms for raising funds through infrastructure and real estate investment trusts.
At the same time, Sebi also unveiled a number of steps to check misuse of private equity agreements for grant of share price-based remuneration and proposed to ban use of bulk SMSes, emails and new-emerging techniques like games, competitions and trading leagues for luring the gullible investors into fraudulent activities.
Sebi also allowed foreign investors to own up to 15 per cent stake in domestic stock and commodity exchanges, a move that is expected to help attract more overseas funds. Currently, foreign entities can hold only up to 5 per cent stake in an exchange. The move will also help the two leading stock exchanges BSE and NSE in their proposed IPOs.
The slew of measures were approved by Sebi at a meeting of its board, which also cleared a proposal to allow companies to allot more shares for their employees during public offers, by hiking the limit for the value of such allotments to Rs 5 lakh, up from Rs 2 lakh currently.
In another step aimed at improving ease of doing business, Sebi decided to provide permanent registration to merchant bankers, investment advisers, research analysts and eight other categories of market intermediaries.
The Securities and Exchange Board of India (SEBI) already gives permanent registration to stock brokers and sub-brokers subject to their compliance with certain requirements.
To improve access to investors in the north-eastern region and spread financial literacy, the capital market regulator also approved setting up a new office in Agartala.
It will also establish an office at Vijayawada, the new capital of Andhra Pradesh.
Making REITs and InvITs more attractive for raising capital, Sebi has now decided to allow them to invest in two- level (special purpose vehicle) structure through holding company.
It also removed the limit on the number of sponsors. Currently, three sponsors are required.
Further, holding company would be allowed to distribute 100 per cent cash flow realised from underlying SPVs and at least 90 per cent of the remaining cash flow.
Regarding REITs, Sebi proposed to allow such trusts up to 20 per cent investment by such trusts in under-construction projects, up from a maximum of 10 per cent allowed currently.
Sebi also proposed to rationalise the requirements under the Related Party Transactions, under which approval of 60 per cent unitholders apart from related parties, is required for passing a related party transaction.
Further, approval is required of 75 per cent unitholders, apart from related parties, for passing special resolutions such as change in investment manager, investment strategy and delisting of units.
The board also clarified the definition of real estate property in the regulations.
With regard to InvITs, Sebi’s board approved a proposal to reduce mandatory sponsor holding in InvIT to 15 per cent.
It also rationalised the requirements for private placement of InvIT. It also amending the definition of the valuer.
SEBI Chairman U K Sinha said three companies have already filed applications to launch their InVITs, while three more are expected soon.
In one of the most significant decisions, Sebi decided to allow well-regulated FPIs to trade directly in these securities without any broker.
Currently, FPIs can trade in Indian markets only through brokers who are registered with the stock exchanges as their members.
Sebi said it has decided to allow Category I and Category II FPIs to have an option to directly access the corporate bond market without brokers, as has been allowed to domestic institutions such as banks, insurers and pension funds.
The revised norms would be applicable for Category-I FPIs that include sovereign wealth funds and central banks as well as Category-II FPIs, which include mutual funds and banks.
However, hedge funds, individuals and other high risk foreign investors will not get this facility.