PSUs will comply with shareholding norms: SEBI

“We have received confirmation from the government that it is very keen to complete the transactions with regard to public sector undertakings (PSUs) and they will not be seeking any extensions,” SEBI chairman UK Sinha told reporters here after its board meeting

Chennai: Market regulator Securities and Exchange Board of India (SEBI) today said the government is committed to ensuring that public sector companies comply with the minimum public shareholding norms and will not be seeking any extension, reports PTI.


As per SEBI norms, private sector firms need to have a minimum public shareholding of 25% by June, while a threshold of 10% is required by PSUs by August.


“I can share with you that we have received confirmation from the government that it is very keen to complete the transactions with regard to public sector undertakings (PSUs) and they will not be seeking any extensions,” Sinha told reporters here after its board meeting.


“Government’s full commitment is there to follow (the norms) with regard to their own companies,” he added.


Promoters of nearly 190 companies are yet to bring down their shareholding to the desired level to meet the guidelines, although SEBI has already provided various options to meet these norms.


Noting that good progress has been made by listed companies in complying with the norms, Sinha said that SEBI was “very hopeful that companies would be able to do it”.


He said the SEBI board today discussed the actions it could take in case listed companies fail to comply with the minimum public shareholding norms.


Sinha added: “What consequences happen if somebody decides to violate SEBI instructions is a matter which is legal and should be well known. It is well known.


“If you decide to violate, for example, the listing agreements, if you decide that you will not follow ICDR regulations, then the consequences are very, very clear. SEBI is serious about public shareholding. SEBI is willing to consider any practical suggestions pertaining to this.”


He also noted that there has been no spurt in delisting of companies.


“SEBI received lot of requests and suggestions from industry, experts to make delisting easier but unfortunately we cannot agree to those suggestions,” he said.


Gold investment speculative, not inflation-hedge: RBI deputy governor

Discounting the argument that gold is a hedge against inflation, the senior-most deputy governor wondered how a hedge instrument can offer as high as 37% return year after year


Mumbai: Terming investment in gold as a speculative activity and not hedge against inflation, RBI deputy governor KC Chakrabarty today said high returns the precious metal offers only reflects high risks associated with it, reports PTI.


Discounting the argument that gold is a hedge against inflation, the senior-most deputy governor wondered how a hedge instrument can offer as high as 37% return year after year.


“If gold has been giving 37% return for the past few years, how can it be a hedge against inflation?


The second logic is that gold is a safe investment. How come a hedge gives a 37% return? ...that means it has become speculation,” Chakrabarty said while addressing the students of the Vivekananda Education Society here.


He said analysis of risk-return trade-off shows that anything which gives higher returns is a risky asset.


“In finance, you know there is a risk-return trade off. Anything that gives high returns has higher risks associated with it. If gold is giving 37% return that means it is very risky. (But) this risk is not manifested (and) that is why it looks safe.


“I have no problem if you say you are speculating in gold. But don’t say gold is hedge against inflation,” he said.


Rising gold import has raised concerns among policymakers as it has increased the current account deficit (CAD), the difference between a country's exports of goods, services and transfers (remittances) and total imports.


India’s CAD hit a record high of 5.4% of GDP in the September quarter, or at $22.3 billion, majority of which was contributed by the gold imports. In this context, the government is trying to curb imports by increasing the duty on the precious metal to make it less attractive.


Referring to banking transactions in rural areas, Chakrabarty said transactions are not increasing to the desired level despite addition of business correspondents.


“Number of transactions are increasing because of addition of accounts but transactions are not increasing in the existing accounts... (instead) inefficiency has gone up...”


He said bank account convertibility was not possible as of now. 


SEBI plans a slew of regulatory changes

The financial watchdog has planned a slew of regulatory changes, including introduction of a debt trading platform. However, mostly intermediaries and corporates are to benefit with hardly any mention of retail investors

The Securities and Exchange Board of India (SEBI) held a board meeting today, in Chennai, and took several key decisions regarding Indian financial and capital markets. However, we notice that most of the changes or modifications mainly pertain to institutions and corporates. SEBI is also supposedly mooting to develop the corporate bond markets to encourage trading on stock exchanges.  Surprisingly, not much has been discussed with regard to the most important entity of them all—the retail investor.

Some of important changes are:

  1. Review of Offer for Sale (OFS) through stock exchange mechanism

As most readers would be aware, the deadline for minimum public shareholding nears (June 2013), SEBI has now made it easier for participants, particularly institutions to acquire promoters’ stake through the stock exchange. For this, SEBI board members agreed to make technical changes namely: margin requirements by institutions and visibility of order book especially with regard to indicative price, to facilitate this.

According SEBI’s press release, “The Board noted that the OFS mechanism has been found to be useful by market participants and popular for offloading shares of promoters in listed companies in order to achieve minimum public shareholding. As the deadline of June 2013 to achieve minimum public shareholding is fast approaching and large number of promoters is expected to offload their shares through OFS route, the Board has approved the following changes in the OFS mechanism to make it more economical, efficient and transparent.”

You can check our earlier article on minimum shareholding and which companies are likely to delist or use this facility over here.

  1. It is amending Takeover Regulations in order to make it more in parity with the existing ‘disclosure’ norms. There isn’t too much clarity on this part and the purpose. Mostly, it is technical in nature.

The SEBI Board took note of the concerns raised during the implementation of Takeover Regulations, 2011, and decided to make it mandatory for companies to disclose the relevant date for making public announcement and offer price, for both acquisitions and preferential allotments. The press release said, “Where the open offer obligations are triggered pursuant to an agreement or otherwise in combination of any modes of acquisition, the ‘relevant date’ for making the public announcement and determination of offer price shall be the earliest date on which obligations are triggered.”

It also changed norms for completion of market purchase of shares made during the offer period. Earlier, the Takeover Regulations did not allow completion of acquisition of shares or voting rights which triggers the open offer obligations until the expiry of the offer period. But such acquisition can be completed after the expiry of 21 working days from the date of the detailed public statement, provided the acquirer deposits 100% of the consideration payable in cash in the escrow account. The regulations also allowed purchase of shares from stock exchange which required to be completed within two days as per settlement process, thus creating an anomalous situation.

Now, SEBI has decided that market purchases made during the open offer period can be completed during the open offer period, subject to such shares being kept in an escrow account. Further, these shares can be transferred from the escrow account to the name of the acquirer after the expiry of 21 working days from the date of the detailed public statement, provided the acquirer deposits 100 percent of the consideration payable in cash in the escrow account.

  1. It plans to modify Mutual Funds Regulations with respect to Infrastructure Debt Fund (IDF). Mainly, SEBI has widened the scope of “strategic investors” in addition to permitting trustees to extend the scheme duration by two years provided 2/3rds of investors give their consent.

The scope of strategic investors would include:

  • Systemically important NBFCs registered with Reserve Bank of India
  • FIIs registered with SEBI which are long term investors, subject to their applicable investment limits
  • An Infrastructure Finance Company registered with Reserve Bank of India as Non Banking Financial Company
  • A Scheduled Commercial Bank
  • International Multilateral Financial Institution


It has also facilitated private placement as an alternative to NFO in certain situations, bypassing public investors. SEBI said, “Private placement to less than 50 investors would be permitted as an alternative. In case of private placement, the mutual funds would only have to file a placement memorandum with SEBI instead of a Scheme Information Document and a Key Information Memorandum. However, all the other conditions applicable to IDFs offered through the NFO route like kind of investments, investment restrictions, etc. would be applicable to IDFs offered through private placement.”


Furthermore, an IDF can invest up to 30% of its assets under management in assets not below investment grade. Earlier it was 20%. At the same time, it has also restricted investment in non-investment grade assets to 30% and which can be extended to 50% with prior approval from Boards of trustees and AMCs.


  1. It was decided by SEBI to widen the ambit of corporate debt trading in India and it plans to amend the broking and sub-broking regulations, which will also include scheduled commercial banks, pension funds, mutual funds, dealers into the definition of “proprietary trading member”. For this, SEBI would include regulations on trading, reporting, membership, clearing, settlement and risk management and much more.
  1. It plans to amend KYC regulations to make it easier for intermediaries to send documents to the KYC registration agency by permitting scanned copies sent over electronic medium. SEBI said, “This proposal will help to reduce the cost of and delay in movement of documents, saving in warehousing charges and avoiding physical print out of documents of millions of existing investors.”
  1. In order to provide liquidity in domestic markets for Indian Depository Receipts (IDR), it was decided to permit two-way fungibility of IDRs. Furthermore, it plans to issue a detail roadmap for future IDR issuances.

You may also want to read How SEBI treats investor associations




4 years ago

If you think about it . . .

Where is the need for KYC in case of resident Indians?

1) all investments are done through cheques that are drawn from the investor's account only; and

2)Pan card is made a mandatory requirement ( proof of pan card to be attached with every investment regardless of the amount).

KYC does not capture any additional information and therefore is only duplication of records.

parimal shah

4 years ago

Why we do not learn from others' mistakes? US went bankrupt because of poor assets quality debt, and allowed to trade in those debts. Why do we want to mimick this? If I know I can pass-on the debt to someone else and make a small money in the bargain, I will be more inclined to give debt even for a poor quality assests.

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