In a series of measures which would facilitate activity and deepen both debt and equity markets, the Securities and Exchange Board of India (Sebi) on Saturday allowed foreign institutional investors (FIIs) to re-invest, in a calendar year, up to 50% of their debt holdings at the end of the previous year. FIIs have invested a net $5.2 billion in bonds so far this year, exhibiting a clear preference for both short-term gilts and corporate bonds. That could be one reason why Sebi will now allow, any unutilised limits of long-term infrastructure bonds to be used, without a nod from it, till total FII investments hit 90% of the available quota.
The capital market regulator also decided at its meeting on Saturday to allow debt-oriented mutual fund schemes more head-room to invest in housing finance companies (HFCs), clarifying that the additional exposure to the financial services sector ?over and above the existing 30%? could not exceed 10% of the net assets of the scheme. Moreover, securities issued by HFCs need to command a minimum rating of AA and be registered with the National Housing Bank.
The Sebi board also concluded that listed entities, coming out with Further Public Offers (FPOs) need not meet profitability criteria. To help companies conform to the listing guidelines by ensuring the minimum floating stock, Sebi also intends to kick off discussions with market participants to ?elicit a concrete plan of action and resolve issues, if any?. Private sector companies need to ensure a minimum float of 25% by June 2013. The regulator has been consistent on its stand that companies need to meet the deadline.
?Stock exchanges shall carefully monitor adherence and take steps to issue advisories to shareholders of non-compliant companies about potential penal actions, so that investors have adequate time to safeguard their interests,? a Sebi release said.
In this context, Sebi has clarified that for the purpose of compliance with rule 19A of SCRR, public shareholding would be computed as ?shares held by public? as a percentage of ?total number of shares held by promoters, promoter group and public? and capital issued outside India would neither be included in the numerator nor in the denominator.
Sebi has also decided to amend the regulations to give more powers to the depositories to deal with non-compliance on the part of issuers in relation to lack of reconciliation of issued or listed capital and actual share capital by the issuer and its appointed registrar and transfer agent (RTA).
Sebi will also come up with draft guidelines, based on the guidance by the working group on foreign investment in India so that uniform norms can be framed for various categories of investors like FIIs, FVCIs, non-resident Indians and qualified financial investors.
In another move which will largely benefit individuals, the regulator has decided to amend the Sebi (Depositories and participants) regulations to enable depositories to store warehouse receipts, fixed deposits with banks, insurance policies and other investment products of post offices in demat form. At present, unutilised FII bond quotas lapse at the end of the year but the new rules would allow buyers to carry-forward their quotas. The regulator has also reduced the utilisation period for limits of gilts and corporate bonds to 30 days and 60 days respectively.