In a move that will bring relief to foreign portfolio investors (FPIs), the Securities and Exchange Board of India (SEBI) has proposed a doubling of the additional disclosure threshold for FPIs with an exposure of Rs 25,000 crore. The suggestion – to raise the floor to Rs 50,000 crore of equity assets under management – has been made with a view to keeping exposures in sync with the increase in market volumes, the regulator observed in a consultation paper floated on Friday.
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SEBI’s August 2023 circular had set out the rules for the additional disclosure to be made, for an AUM exceeding Rs 25,000 crore, requiring FPIs to provide granular details of all their investors and stakeholders, having an ownership or economic interest, on a “look-through” basis.
The consultation paper noted that the ‘potential to disrupt the functioning of market’ has to be evaluated relative to the size of the market. In this regard, a broad market parameter such as turnover can be used as a factor to assess the size of market, it said. Data for average daily turnover – in the capital market segment on the NSE – for FY 2022-23 and FY 2024-25, until December 2024, shows an increase of 122%.
The threshold had been put in place to ensure that the regulations of Press Note 3 were not breached by FPIs. The regulator had been apprehensive that some of the bigger foreign players might disrupt the market. Press Note 3 was issued in 2020 to regulate flows coming into India from countries that shared a land border. The rules made the prior approval of the government mandatory for such direct and indirect investments into India.
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The August 2023 circular had also mandated the disclosure of granular details of all entities holding any ownership or control in an FPI, without any threshold if they held more than 50% of their Indian equity AUM in a single Indian corporate group. The regulator’s intention was to guard against possible circumvention of minimum public shareholding (MPS), and substantial acquisitions of shares and takeovers (SAST) regulations.
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