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Oct 06, 2012, 09.32 PM IST
Reacting to the announcements made by the Sebi board after its meeting on Saturday evening, corporate tax lawyers HP Ranina, Prithvi Haldea and former executive director at Sebi Sandeep Parekh explain to CNBC-TV18 the various aspects of the announcements and the probable impact on foreign investment and the markets.
Reacting to the announcements made by the Sebi board after its meeting on Saturday evening, corporate tax lawyers HP Ranina, Prithvi Haldea and former executive director at Sebi, Sandeep Parekh explain to CNBC-TV18 the various aspects of the announcements and the probable impact on foreign investment and the markets.
Below is an edited transcript of the experts' analyses on CNBC-TV18.
Q: What are your key takeaways from the announcements made after the Sebi board meeting?
Ranina: The announcements were expected to some extent. I am not very enthused because there is not much that will happen that will encourage foreign institutional investors (FIIs). There is that one provision which enables FIIs to reinvest. But this was on expected lines.
Haldea: This was not really a meeting of the Sebi board. At a typical meeting of the Sebi Board, there would be an announcement of a lot of decisions This was an occasion where the finance minister's first visit to Sebi and meeting the Sebi Board after assuming charge. So, it was obvious that there would be not be any announcements of significant decisions.
However, it has become very evident that the Sebi and government are very keen that the public shareholding norms, which have to be met by June 2013, should be complied with.
Sebi has already relaxed a lot of regulations, has also allowed several new routes for promoters to dilute and it is hoped that with the government's reiteration in the next eight-to-nine months, non-compliant companies will attempt issuances of various kinds to comply with these norms.
On the FPO, an attempt has been made towards rationalisation. Sebi is now thinking in terms of allowing IPOs only for companies which have a track record of profitability. If that is being dispensed with for FPOs, it is more in line with the fact that a company is not delisted if it starts to make losses.
An FPO is basically of an existing listed company and therefore it is impractical and inappropriate to prescribe any profitability clause for a listed company. By that logic, you will to have then re-list all loss-making companies or any company which from profit turns to losses.
I think the government has to stop the continuous increase in FII investments in the Indian debt market. The government should encourage domestic investors, financial institutions and mutual funds to take a greater exposure to debt. I think we should not become overtly dependent like the equity market is, on FIIs.
Parekh: The announcements show the nature of political support given to regulatory bodies. I see this as a great effort of political support to allow the regulators to aid in the implementation of those reforms.
Q: Are none of the proposals of any significance?
Ranina: Not at all. But the proposals will smoothen the process and meet the demand of the FIIs. I don't think any of the announcements are going to really spur any further increase in stock prices or lure more FIIs into India.
Q: How much of an impact will the reinvesting of 50 percent of last year's debt into the next year, be?
Ranina: I don't know the exact figures. But it certainly will be a boost to a limited extent. Now what debt the FIIs want to reinvest or whether the FIIs want to take the money out - that is their decision. But they have been given the facility that if they want to reinvest 50 percent of the debt, they can do so. We don’t know what impact it will have on the capital markets. It is just a facilitating provision.
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