SAT rejects Elara’s appeal against Sebi over SpiceJet warrant conversion

SAT rejects Elara’s appeal against Sebi in warrant conversion matter

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26 Aug, 2025 12:21

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The Securities Appellate Tribunal (SAT) has dismissed the appeal filed by Mauritius-registered Elara India Opportunities Fund, which had challenged the regulator’s rejection of their application to convert the warrants of SpiceJet.

The detailed order is yet to be uploaded by SAT, however, the tribunal on October 15 said the appeal is ‘dismissed’.

Elara India Opportunities Fund had sought permission from Sebi to convert Rs 416 crore worth of SpiceJet warrants into equity shares, but the request was rejected in March 2025 citing the fund's failure to comply with beneficial ownership disclosure norms.

The warrants in question - 8.33 crore in total - were subscribed by Elara on January 26, 2024 with an upfront payment of 25 percent or Rs 125 crore, and the remaining Rs 291 crore was due at the time of conversion into shares. The 8.33 crore warrants to Elara were issued at Rs 50 each, amounting to Rs 416 crore.

After the March 2025 verdict, Elara India Opportunities Fund had sought a status quo from the tribunal, pleading that there is a risk of appropriation and write off by SpiceJet of the 25 percent advance payment made while subscribing the warrant. The tribunal allowed the status quo as passed in the order of April 28, 2025 for six weeks.

Sebi’s circular of August 2023 has mandated foreign portfolio investors (FPIs) with 50 percent of India equity Asset Under Management (AUM) in a single corporate group or FPIs with Rs 25,000 crore of AUM - whether individual or with investor group - must share granular details of all entities holding ownership, economic interest, or exercising control in the FPI, on a full look through basis, up to the level of all natural persons, without any threshold.

Sebi’s 2023 circular said the failure to comply by the deadline would result in cancellation of FPI licenses and may require liquidation of holdings by September 8, 2024. Leftover holdings post the deadline is to be transferred to the Investor Protection Fund (IPF), however, Elara claimed the Sebi circular did not clarify the status of outstanding securities.

Sebi was of the view that having not complied with granular disclosure norms, Elara no longer met the criteria to convert the warrants. The fund had urged Sebi to allow an exception so it can convert the warrants and exit the investment via open-market sales, but the regulator directed Elara to transfer the warrants to the Investor Protection Fund. Elara had challenged Sebi’s rejection of exemption application before the Securities Appellate Tribunal.

One expert said the warrants issued by SpiceJet are unlikely to serve any practical purpose, as they cannot be converted into equity shares under the current circumstances. It is also improbable that the Investor Protection Fund will step in to pay the remaining 75 percent of the subscription amount and acquire the airline’s shares, added the expert. Now, SpiceJet too may need to look out for another investor for a fund raise.

However, another expert raised the question as to how Sebi can allow entities to increase stakes in Indian companies that are not complying with its directives.

Elara India Opportunities Fund has the option to challenge the SAT order in Supreme Court in 60 days. A similar kind of appeal was also made by Verspera Fund for some other kind of investment, which too the tribunal had rejected.

Interestingly, these two funds - Elara India Opportunities Fund and Vespera Fund - were named in the Adani-Hindenburg case, and Sebi had asked both funds to share granular details of beneficial ownership.