Sahara disguised OFCD issue prospectus as a DRHP: SEBI

SEBI counsel Arvind P Datar told the Securities Appellate Tribunal (SAT) that the Sahara Group disguised its prospectus for the OFCD issue as a draft red herring prospectus, as it had contained the details of price and quantum of the issue among other things

Mumbai: Market watchdog Securities and Exchange Board of India (SEBI) on Monday charged the Sahara Group with disguising its prospectus for the optional fully convertible debenture (OFCD) issue as a draft red herring prospectus (DRHP), as it had contained the details of price and quantum of the issue among other things, reports PTI.

“My submission is that the Sahara Group had actually issued their public issue prospectus disguised as a DHRP. A DHRP does not have the price or the quantum of securities. But the Sahara Group’s DHRP contained the price and quantum, as well as the period of maturity and conversion value. So, it was a full-fledged prospectus which was issued.

“This cannot be called a DHRP and hence cannot escape SEBI’s jurisdiction,” SEBI counsel Arvind P Datar told the Securities Appellate Tribunal (SAT) on the fifth day of the hearing to the OFCD issue.

SEBI had asked two Sahara Group companies to refund the money they collected through this issue, which was challenged by the company at the SAT.

The SEBI counsel said under Section 236 of the Companies Act, any document inviting deposits or offer of any shares or debentures, is termed as a ‘prospectus’. He further argued that the two Sahara Group companies also violated the provisions of SEBI’s disclosure & investor protection guidelines.

Refuting Sahara’s earlier argument that there were legal fetters which ensured that its OFCDs were not ‘marketable’ securities, he said any security which has a market value is tradable and ‘marketable’.

“Such arguments are merely to escape provisions of the Securities Contract (Regulation) Act (SCRS). The marketability argument cannot take it out of the SCRA’s purview. They cannot escape SCRA and SEBI Act,” he said.

Mr Datar also refuted Sahara's earlier argument that OFCDs were ‘hybrid’ instruments over which SEBI has no jurisdiction.

“They never intended to issue any ‘hybrid’. Even in 2009, they kept on calling it a debenture issue. It has been called a debenture in their auditor’s report as well as the returns they filed,” he argued, quoting from these documents.

Further arguments related to the case will resume on Wednesday.


Govt relaxes norms for FII investments in infra sector

Under the revised norms, FIIs would be allowed to invest up to $5 billion out of the total limit of $25 billion in long-term infrastructure bonds, with an initial maturity of five years and lock-in period of one year

New Delhi: Concerned over low inflow of foreign institutional investor (FII) funds into long-term corporate bonds, the government on Monday announced relaxation in the norms that would allow foreign investors to invest in infrastructure bonds and trade such instruments among themselves, reports PTI.

Under the revised norms, which would be notified by the market regulator Securities and Exchange Board of India (SEBI), FIIs would be allowed to invest up to $5 billion out of the total limit of $25 billion in long-term infrastructure bonds, with an initial maturity of five years and lock-in period of one year.

The relaxation in guidelines follows low inflows of FII funds in corporate bonds. While the government on 31 March 2011 had raised the investment limit in such bonds from $5 billion to $25 billion (Rs1.12 lakh crore), only $109 million (Rs500 crore) has been received so far.

“...consultations were held with the stakeholders on the issue and it was concluded that the three-year lock in period and doubts regarding the residual maturity of five years were discouraging FIIs from investing in this scheme,” a release said.

The government, it said, has modified the scheme in consultation with the Reserve Bank of India (RBI) and SEBI to “make it more attractive to FIIs”.

SEBI last month had allowed Qualified Foreign Investors (QFIs) to invest up to $3 billion, out of the limit of $25 billion, in Mutual Fund Debt Schemes which invest in the infrastructure sector.

Out of the remaining $22 billion, $5 billion could be invested by FIIs in long-term infrastructure bonds “with an initial maturity of five-years or more at the time of issue and residual maturity of one year at the time of first purchase by FIIs”.

These investments, it said, will be subject to lock-in period of one year. The FIIs would also be allowed to trade such securities among themselves within that period and sell to domestic investors after expiry of one year.

It further said that the remaining $17 billion limit would be available to FIIs and can be invested in long-term infrastructure bonds with an initial maturity of five years or more and residual maturity of three years at the time of first purchase by FII.

The lock-in period for such investments would be three years. However, FIIs would be allowed to trade such instruments among themselves during the three-year period and after that they would be allowed to sell them to domestic investors.

The government proposes to double investment in infrastructure sector to $1 trillion during the 12th Plan (2012-17).


Bajaj Allianz General Insurance: Right risks should get right price for mediclaim, motor insurance

Bajaj Allianz General Insurance is collecting detailed customer information which together with the claims experience will help it to arrive at the right price for health and motor insurance

TA Ramalingam, head-underwriting, Bajaj Allianz General Insurance, says motor insurance has better data availability than health insurance so far. In an interview to Moneylife, he was optimistic that health insurance, like motor insurance, will be able to offer the right price for good policyholders. Excerpts:

You mentioned about in-house data for analysis. Do you use the data from the Insurance Information Bureau (IIB), a body of the Insurance Regulatory and Development Authority (IRDA)?

We depend on management information systems and constant feedback from our in-house claims processing team (health administration team, or HAT). It sends signals based on the claims experience to help us refine the underwriting process. We do look at IIB at the macro level to crosscheck our experience, like on the top five diseases and so on.

IIB data may not be accurate. Your comments.

We may get misled if we entirely rely on it. We may end up on a different track. Some insurers may not give data in the format that is actually wanted by IIB. For example, new insurers may give data in sub ICD level rather than ICD level. (ICD stands for International Classification of Diseases.) We depend on our data analysis and just crosscheck with IIB at the macro level. The more qualitative data we get, the better it is from the business perspective. If the common insurance database is available with accurate information, it will help the industry.

You have rich data from your claims experience. How would you improve on it? New insurers have a lot of questions at the time of proposal.

New companies are capturing detailed information about customer profile and medical conditions. It helps with proper customer segmentation. Beyond a certain level, we can't just fight on price. We will be competitive with proper segmentation. The detailed data capture has to happen to offer right pricing for customers. It will happen soon in health insurance. Agents will see other agents doing it and will follow suit.

Car insurance has started capturing a lot of information at the proposal stage to offer better premium rates for good drivers compared to bad drivers.

Exactly. Motor is doing it to a great extent and health will follow it. After all, motor and health are big portfolios of general insurance. Today, the available information is not good enough. The actuaries cannot do proper pricing due to lack of complete information. Right risks should get the right price.

(The first part of this interview was published on Friday. Read, "Bajaj Allianz General Insurance: Senior citizen mediclaim product has been profitable"


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