Sebi board to consider clutch of reforms on FPIs, big cos, REITs, InvITs today

Kolkata: From relaxing the minimum IPO requirements for large companies to stretching the time window for them to fulfil minimum public shareholding norms to granting equity status to REITs and InvITs, market regulator Sebi is supposed to discuss significant issues concerning the new issue market at a board meeting today, September 12. A proposal for firms that have a market cap of more than Rs 50,000 crore but less than Rs 1 lakh crore, the minimum public offer should be Rs 1,000 crore. Also it has to achieve a minimum public shareholding of 25% to be fulfilled in a time window of five years. The current period is three years, said reports.

Another significant reform will be relaxing compliance norms for FPIs (foreign portfolio investors), increasing the scope of rating agencies and modifying regulation for accredited investors in some AIFs (alternative investment funds). The issue of granting equity status to REITs and InvITs could also be discussed.

To boost the flow of foreign funds in the Indian equity markets, the market regulator wants to simply compliance norms for low risk investors. A framework titled Single Window Automatic & Generalised Access for Trusted Foreign Investors could be discussed. It envisages smooth access for investment by FPIs in India. This will enable FPIs to register in a single platform and not on multiple platforms that will remove the need for multiple documentation and repeated compliance requirements.

FPIs have been withdrawing funds regularly form the Indian stock market and the returns generated by the Indian market has fallen alarmingly over the past few months compared to the Asian peers. The objective of this reform is to increase the FPI flow again. Reports state that Sebi has central banks, sovereign wealth funds, multilateral entities, highly regulated public retail funds, regulated insurance companies as well as pension funds as low-risk FPIs.

The minimum public shareholding for very large companies seem up for reform. For a company with market cap between Rs 1 lakh crore and Rs 5 lakh crore, the minimum public shareholding could be set at Rs 6,250 crore and a minimum of 2.75% of the post-issue capital. The company has to fulfil the condition within 10 years depending on shareholding levels.

If the issuing firm has a market cap in excess of Rs 5 lakh crore, the proposed minimum public shareholding could eb set at Rs 15,000 crore. It can also be just 1% of the post-issue capital and a minimum stake dilution of 2.5%. The benefit to the promoters will be avoiding a responsibility of fast and large-scale dilution of stake and they can gradually raise extent of public shareholding.