In a series of reforms, capital markets regulator Sebi or Securities and Exchange Board of India on Wednesday eased norms for start-up listings, and allowed mutual funds to segregate distressed assets to safeguard investment returns. At a meeting held here, the Sebi board also approved a proposal to expand the offer-for-sale mechanism for reduction of stake in listed companies and relaxed clubbing of investment limit norms for well-regulated foreign investors.
Besides, it cleared a proposal to allow custodial services in the commodity derivatives market to enable institutional participation.
With regard to listing of start-ups, the regulator has relaxed norms for new-age ventures in sectors like e-commerce, data analytics and biotechnology to raise funds and get their shares traded on stock exchanges.
Other measures included renaming the 'Institutional Trading Platform' that the regulator had created for such listings as 'Innovators Growth Platform'.
The relaxation in norms follows tepid market response to the existing platform and demands from various stakeholders to make the rules easier and the platform more accessible in the wake of expanding activities in the country's start-up space.
"It (Institutional Trading Platform) has not taken off since 2015, we are aware of that, Sebi tried reviving it in 2016 also. But that time it couldn't be done."
"Now this time since June-July we had a detailed discussion with the tech companies from Bangalore... We have tried to build in various features and we hope that it will be used for listing and also exit of funds which are in start-ups," Sebi Chairman Ajay Tyagi told reporters here after the board meeting.
In another big move, the regulator has decided to allow mutual funds to create segregated portfolios with respect to debt and money market instruments in case of credit events while ensuring fair treatment to all unit holders.
Creation of segregated portfolios is a mechanism to separate distressed, illiquid and hard-to-value assets from other more liquid assets in a portfolio. It prevents the distressed assets from damaging the returns generated from more liquid and better-performing assets.
"We will see that this scheme is not misused," Mr Tyagi said.
The regulator also relaxed its norms for clubbing of investment limits for well-regulated foreign portfolio investors (FPIs).
According to Sebi, multiple entities having common ownership, directly or indirectly, of more than 50 per cent would be treated as part of the same investor group and their investment limits would be clubbed.
However, clubbing of investment limits would not be applicable in case of entities having common control if the FPIs are appropriately regulated public retail funds.
The OFS norms will be eased to allow this mechanism for all companies with market cap of Rs 1,000 crore and above, as against the current limit of top 200 companies.
Also, if the seller fails to get sufficient demand from non-retail investors at or above the floor price on the first day of offer, then the seller may choose to cancel the officer post bidding in full (both retail and non-retail) on the first day itself and not proceed with the offer to retail investors on the second day.
Besides, the regulator said that an earlier proposed exercise for determining a uniform bond valuation methodology to be followed by all regulated entities across the financial sector would not be pursued.
Such an exercise was suggested by a working group on development of corporate bond market in India, chaired by HR Khan.
However, Sebi will prescribe high-level principles to be followed uniformly across all mutual funds for strengthening the existing system of valuation of corporate bonds for mutual funds. Regarding the pricing agencies, the regulator has decided to evolve a supervisory and regulatory framework.
Also, housing finance companies and systemically important non-banking financial companies (NBFCs) may be exempted from disclosure of increase or decrease in shareholding due to encumbrance or release of the encumbrance of shares. A similar exemption already available to scheduled commercial banks and public financial institutions.
In case of an OFS, the board has approved that fresh filing of offer document with the board will be required, when there is a change in either the number of shares offered for sale or the estimated issue size by more than 50 per cent.
In case of any increase or decrease in the estimated issue size by more than 20 per cent, a fresh filing of the offer document will be required. At present, such requirement is both for fresh issues and offer for sale.
Commenting on Sebi allowing custodial services in commodity derivatives, Sanjit Prasad, CEO at ICEX, said that the regulator has taken one more step to strengthen the infrastructure of the commodity markets.
"Such measures are building blocks which will pave the way to institutional participation from mutual funds. In commodity derivatives market, Sebi is taking all those steps which it had taken while developing the Indian capital market more than two decades back," he added.