Sebi FPI norms: Quantum less than projected, no immediate deadline to liquidate, say sources

"There is no immediate deadline or cliff for FPIs to liquidate any holdings," the informed sources added.

Foreign portfolio investors (FPIs) that may be required to provide granular details of their beneficial ownership are expected to be significantly less than what was estimated in Sebi's consultation paper and board meeting note, sources said.

Based on the data as of March 31, 2023, Sebi had estimated that FPIs with AUM (assets undermanagement) around Rs 2.6 lakh crore would be required to make additional disclosures.

"There is no immediate deadline or cliff for FPIs to liquidate any holdings. And, there’s no risk of MPS (minimum public shareholding) violation in concentrated FPI holdings in companies with no identified promoter," sources added.

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What was the SEBI mandate?

In 2023, the Securities and Exchange Board of India (Sebi) had mandated FPIs holding more than 50 percent of their Indian equity AUM in a single Indian corporate group or holding more than Rs 25,000 crore of AUM in Indian markets to provide additional disclosures regarding their ownership, economic interest and control.

The objective behind this move is to safeguard investors against possible circumvention of MPS rules, as per Sebi.

"Concentrated investments raise the concern and possibility that promoters of such corporate groups are acting in concert... If this were the case, the apparent free float in a listed company may not be its true free float, increasing the risk of price manipulation in such scrips," Sebi had said.

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Timelines

The SOP that custodians follow for enhanced disclosures and exemptions were first put up in October 2023.

"FPIs that met the criteria for enhanced disclosures as of October 31, 2023, had time till January 2024 end to rebalance their holdings if they so wished," sources said.

"If they continue to meet the criteria for enhanced disclosures as of January end, they would have an added 10/30 working days to provide the additional details required. Even thereafter, if they fail to provide any details, they would have a further six months to reduce their holdings," the informed sources further added.

FPIs exempt from making additional disclosures

Sovereign wealth funds, listed companies on certain global exchanges, public retail funds, and other regulated pooled investment vehicles with diversified global holdings are exempt from making additional disclosures.