SEBI’s new reforms make way for easier startup listing regulations

Market watchdog, Securities and Exchange Board of India (SEBI), gave a nod to easing some of the startup listing norms on 12 December. They also permitted mutual funds to side-pocket defaulting assets so that the NAV (and hence returns) will not be affected.

SEBI accepted a recommendation to expand the offer-for-sale mechanism to bring down stake in listed firms while easing some of the rules on clubbing on investment limit for overseas investors. The expansion will entail every company with a market capitalization exceeding Rs. 1000 Cr.  

For this, they have taken suggestions of a working group chaired by Mr H R Khan, former RBI Deputy Governor as well as public opinion into consideration.

At present, Foreign Portfolio Investors (FPI) too belong to the same investor group and the maximum investment allowed for of every entity is clubbed to derive the investment limit for a single FPI. This is to avoid the same beneficiaries investing through several entities.

“The proposal that clubbing of investment limit for FPIs will be on the basis of common ownership of more than 50% or common control was approved,” SEBI announced.

Nevertheless, the clubbing of investment limits will not stand for entities with common control, if the FPIs are suitably monitored public retail funds like mutual funds or insurance firms accessible for retail subscribers.

Following the ongoing case against Sun Pharma, SEBI assured to amend current FPI norms accordingly and propose high-level but uniform guidelines across fund houses.