Lotus Global Investments and LTS Investment Fund, the two Mauritius-based foreign portfolio investors (FPIs) which had approached the Securities Appellate Tribunal (SAT) against the Securities and Exchange Board of India (Sebi)’s mandate to provide additional disclosures, withdrew their appeals on Tuesday.  

According to a source familiar with the matter, the appeals were withdrawn as the two FPIs managed to rebalance their portfolios and liquidated the excess holdings over the past few days.

The funds had appealed to the SAT seeking an extension of the timeline to liquidate and rebalance their Indian listed securities portfolios, which were beyond the regulator’s specified thresholds. Sebi’s deadline to comply with its concentration norms ended on Monday.

The hearings were scheduled for Tuesday, but the legal counsel of the FPIs, PR Ramesh, informed the court that he has instructions to withdraw the pleas. The two FPIs had filed separate appeals with the SAT on August 20. These FPIs were named in the January 2023 report by US-based short-seller Hindenburg Research on Adani Group.

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Last year in August, Sebi had introduced an additional disclosure regime for FPIs to prevent them from circumventing minimum public shareholding norms. FPIs holding over 50% of their equity AUM in a single corporate group or holding domestic equities worth Rs 25,000 crore were asked to disclose granular details of ownership, economic interest or exercising control.

While this framework was effective from November 1, 2023, the regulator had provided a time frame of 90 days for existing FPIs to re-adjust their holdings to avoid additional disclosures.

Non-compliant FPIs were then given 30 trading days to make the required disclosures, after which their registration will become invalid, according to Sebi’s August circular.

Sebi recently provided flexibility to FPIs to deal with their securities holdings after their registration has expired. If it continues to hold the securities after 180 days, the FPI will be given another 180 days to dispose of their securities subject to a financial disincentive of 5% of sale proceeds charged on the disposal of securities.

In July, the regulator also proposed to bring offshore derivative instruments, popularly known as P-notes, under the additional disclosure regime.