Mumbai: The Securities and Exchange Board of India (SEBI) has approved a set of reforms for the capital markets in an attempt to facilitate investments from domestic and foreign investors while also ironing out certain regulatory grey areas. These were the key takeaways at the meeting chaired by SEBI chief Tuhin Kanta Pandey.
Boosting retail investors’ presence in IPOs
With renewed retail investor interest in Initial Public Offerings (IPOs), the SEBI has lowered the Minimum Public Offer limit to Rs.1,000 crore and at least 8% of the post-issue market cap. Currently, any IPOs with a post-issue market cap of above Rs.1,00,000 crore are required to offer Rs.5,000 crore or at least 5% of the post-issue market cap to retail investors. With this rule, and its variations based on market cap, the SEBI aims to offer retail investors a greater opportunity to invest in high-potential stocks.
Single Window Clearance for Foreign Institutional Investors
Currently, foreign investors have to fill out loads of paperwork or run from pillar to post to meet the various requirements to invest in India. Now, SEBI has proposed a new framework- Single Window Automatic & Generalised Access for Trusted Foreign Investors (SWAGAT-FI)- offering a single, unified window for foreign investors to invest in domestic securities. This framework will apply to Foreign Portfolio Investors (FPIs) that are atleast 75% owned by foreign governments or have met the regulatory requirements in their home countries.
The new framework — Single Window Automatic & Generalised Access for Trusted Foreign Investors (SWAGAT-FI) — would provide easier investment access to low-risk foreign investors, enable a unified registration process across multiple investment routes and reduce repeated compliance and documentation for such entities.
Currently, FPIs access the country through multiple routes based on the type of investor, investment and investee. Each route has its own documentation and compliance obligations. While the multiple routes will continue, the proposed single automatic window will enable a unified registration process across all these avenues.
The automatic window will be applicable to FPIs that are at least 75% owned by foreign governments or are appropriately regulated in their home countries.
Insurance companies and pension funds join domestic Mutual Funds for anchor investments
According to the reforms, SEBI will now allow IRDAI-accredited life insurance companies and PFRDA-registered pension funds to participate in anchor investment rounds. There can be up to 15 anchor allottees, where shares up to Rs.250 crore can be allocated to up to 15 anchor allottees.
Of this one-third will remain with domestic mutual funds, while the rest can go to pension and insurance companies.
REITs/ AIFs status
Real Estate Investment Trusts (REITs) will now be classified as equity, paving the way for Mutual funds to invest here. This would open the doors for retail investors to earn higher returns from real estate rentals through the mutual fund route.
Alternative Investment Funds (AIF) schemes will now be considered a separate category, offering them greater flexibility and less compliance around investor protection.
