Sebi blocks Elara’s Rs 400 crore SpiceJet warrant conversion, fund moves SAT to challenge order

Sebi issued enhanced disclosure norms for FPIs in August 2023.

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26 Aug, 2025 12:21

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Capital market regulator Sebi has rejected a request from the Mauritius-registered Elara India Opportunities Fund to convert over Rs 400 crore worth of SpiceJet warrants into equity shares, citing the fund's failure to comply with beneficial ownership disclosure norms, multiple sources told Moneycontrol on condition of anonymity.

According to people familiar with the matter, the regulator communicated its decision to Elara on March 28, and in response to that, Elara has mounted a challenge before the Securities Appellate Tribunal (SAT), with the expected to come up for hearing later this week.

Emails sent to Sebi, Elara, and SpiceJet remained unanswered at the time of publication.

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

However, Sebi's circular issued in August 2023 required certain foreign portfolio investors (FPIs) to disclose granular details of their ultimate beneficial owners by March 12, 2024. This included funds that either had 90% of their India portfolio concentrated in a single corporate group, or held over Rs 25,000 crore in Indian equities.

Failure to comply by the deadline would result in cancellation of FPI licenses and require liquidation of holdings by September 8, 2024, Sebi had said.

Leftover holdings post the deadline is to be transferred to the Investor Protection Fund (IPF), however, the circular did not clarify the status of outstanding warrants.

Elara, a pooled investment vehicle registered in Mauritius as a Collective Investment Scheme (CIS), argued it should be exempt under the circular, which listed sovereign wealth funds and foreign mutual funds as exceptions. It applied for exemption in January 2024, but Sebi on January 24,2024 instructed custodians not to grant exemptions to CIS funds from Mauritius.

Having lost its FPI license in March 2024, Elara no longer meets the criteria to convert the warrants. The fund has urged Sebi to allow an exception so it can convert the warrants and exit the investment via open-market sales. But the regulator has held firm, instructing Elara to transfer the warrants to the IPF.

Elara has now taken the legal route, challenging Sebi’s stance before the SAT and seeking relief to proceed with the warrant conversion.

“The warrants are practically worthless if they can't be converted into shares. The IPF won’t pay the remaining Rs 291 crore for the conversion either,” said a person aware of the matter. “SpiceJet will now need to find new investors to raise the capital, while Elara is staring at a Rs 125 crore write-off.”

SpiceJet, in a January 26 filing, had disclosed the issue of 8.33 crore warrants to Elara at Rs 50 each - amounting to Rs 416 crore. Since Elara holds under 1% in the airline, it doesn’t appear in the company’s shareholding pattern.

A second source pointed to the lack of regulatory clarity, arguing Sebi should have laid out a standard operating procedure for how outstanding warrants would be handled under the August 2023 circular. “The FPI framework has seen multiple revisions, and each time the goalposts have shifted,” the person said.