Two funds Elara India Opportunities Fund Limited and Vespera Fund Limited, have been forced into an expensive exit from Indian markets after failing to disclose their ultimate beneficial ownership (UBO) as mandated by SEBI. The Securities Appellate Tribunal (SAT) has upheld the Securities and Exchange Board of India’s (SEBI) order against two Mauritius-based offshore investors.
The tribunal dismissed both funds’ appeals seeking permission to pay the remaining 75 percent on convertible warrants they had subscribed to in Indian companies such as SpiceJet Limited, Mishtann Foods Limited, Felix Industries Limited, and Rushil Décor Limited.
SAT observed that the funds had made “conscious decision not to disclose granular details, decided to liquidate investments in securities of Indian companies”. SAT was referring to SEBI’s August 2023 circular requiring complete disclosure of the ultimate beneficial owners of Foreign Portfolio Investors (FPIs). The circular was part of SEBI’s broader push to trace the true investors behind offshore funds holding significant stakes in Indian companies and to prevent promoter-linked entities from using the FPI route to bypass shareholding and disclosure norms.
According to SAT, despite being aware of the tightening regulations, both funds continued subscribing to new convertible warrants between October 2023 and February 2024, well after the circular came into effect and compliance deadlines had begun.
Costly Exit from India
Vespera had paid Rs 4.99 crore to subscribe to the warrants of Mishtann Foods and Rs 7.42 crore for Rushil Décor. The final payments for these were due in March and June 2025, respectively. Elara, on the other hand, also paid Rs 4.99 crore for Mishtann Foods, Rs 108 crore for SpiceJet, and Rs 1.75 crore for Felix Industries. The remaining payments were scheduled between March and August 2025.
The total amount now at risk for both funds stands at around Rs 127 crore. SAT, however, granted a six-week status quo to prevent companies from appropriating these amounts, giving the funds time to consider approaching the Supreme Court.
The Funds’ Defence
In their defence, Elara and Vespera argued that their purchase of warrants took place when their FPI registrations were still active and valid. They contended there was no explicit restriction on such investments under SEBI’s August 2023 circular. The funds maintained that the circular did not specifically address how convertible securities like warrants should be treated and that they acted under a bona fide belief that their transactions were permissible.
They said the alleged non-compliance was merely procedural and technical. Both funds also pointed out that they were in regular communication with their Designated Depository Participant (DDP), ICICI Bank, seeking exemption under the Pooled Investment Vehicle (PIV) category — a carve-out meant for collective investment schemes with diversified investor bases.
However, in January 2024, SEBI directed custodians to hold all such exemption requests. On March 12, 2024 — the very day their registrations lapsed — SEBI rejected Elara and Vespera’s PIV claims. The funds argued that if SEBI had acted earlier, they could have paid the remaining 75 percent and exercised their warrants within time.
They also noted that they had already liquidated almost all their Indian holdings, Rs 7,650 crore in Elara’s case and Rs 2,267 crore for Vespera, and had paid financial disincentives of Rs 3.3 crore and Rs 7.43 crore, respectively, for delayed divestment.
SEBI’s Counter
SEBI, however, submitted that both funds continued investing and subscribing to new warrants even after repeated warnings from their custodian and communications from the regulator. They had also received a show-cause notice in November 2023 but approached SEBI only in February 2025, almost a year after their registration became invalid.
This conduct, SEBI said, showed that the non-compliance was deliberate. The regulator argued that such large institutional investors managing thousands of crores “cannot claim ignorance of regulatory changes.” SAT agreed, holding that Elara and Vespera’s decision to liquidate their holdings while simultaneously subscribing to new warrants between December 2023 and February 2024 was “in flagrant violation of SEBI’s circular.”
Refusal to Disclose Beneficial Owners
SEBI’s August 2023 framework required FPIs to make a “full look-through” disclosure of ownership and control up to the level of the natural person. They were given until January 29, 2024, to re-align their portfolios and until March 12, 2024, to submit granular disclosures. FPIs failing to comply were required to liquidate their holdings within 180 days, later extended by another 180 days with a 5 percent penalty on sale proceeds payable to SEBI’s Investor Protection and Education Fund (IPEF).
Both funds failed to disclose their ultimate beneficial owners. SEBI’s investigation later found that Elara and Vespera were owned through three offshore feeder entities, Oyster Bay Fund Limited and Amalthea Global Fund Limited in Bermuda, and Pangaea Fund Limited in the Cayman Islands. Both FPIs were regulated by the Financial Services Commission of Mauritius and were registered as Category-I FPIs.
SEBI Uncovers the Real Owner
When SEBI summoned the funds for UBO details, they failed to provide the information, prompting SEBI to seek assistance from overseas regulators. Authorities in Bermuda and the Cayman Islands confirmed that Rajendra Bhatt was the ultimate beneficial owner controlling all three feeder funds, effectively making him the person in charge of both Elara and Vespera.
The SAT order recorded SEBI’s findings, noting, “The appellants did not have the relevant information about the ultimate beneficial owners of these three funds who had invested in the appellant FPIs. SEBI sought details from the Overseas Regulators with whom these funds are registered. The Overseas Regulator informed that one Rajendra Bhatt is the ultimate beneficial owner of all three funds. Mr. Rajendra Bhatt, by control of both these funds from Bermuda and Cayman Islands, was beneficial owner of both the FPIs.”
There are divergent views on the issue. One view is warrants are now effectively useless, as they cannot be converted into shares and the Investor Protection Fund is unlikely to step in. Another expert questioned how SEBI could allow any entity to raise stakes in companies that are not complying with its rules.
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