Sebi moves to deter promoters from misusing FPI route

The Securities and Exchange Board of India (Sebi) has proposed that foreign portfolio investors (FPIs) with investments concentrated in a single stock or stocks of a business group should provide granular information on beneficial ownership to custodians.

- Pavan Burugula

India’s markets regulator proposed tightening of disclosure requirements for offshore funds in a consultation paper released on Wednesday. The move is intended to prevent promoters of Indian companies from abusing the FPI route to circumvent minimum public shareholding norms.

The Sebi consultation paper comes days after a Supreme Court-appointed expert committee observed that the regulator is struggling to ascertain the identities of the ultimate beneficiaries in 13 suspected FPIs in Adani Group firms. “It would be a humongous task to figure out who the ultimate beneficial owner is," the expert panel had said in its report.

Sebi observed this tightening may potentially impact FPI holdings of around ₹2.6 trillion worth of assets in India, adding that this constitutes around 6% of total FPI assets under management and less than 1% of India’s total market capitalization.

Sebi has proposed a risk-based classification of funds based on the concentration levels of their portfolios. Funds falling under the high-risk list would need to provide granular details of beneficial ownership, Sebi added.

Market participants can provide feedback on this paper to Sebi by 30 June.