Sebi firm on FPI ownership norms as deadline looms
Sebi) is set on imposing tightened ultimate beneficial ownership norms for overseas investors with effect from February 1 despite pressure from foreign banks and a section of offshore fund managers to ease the rules ahead of the deadline, said a person with direct knowledge of the matter. According to unofficial estimates, there could be a sell-off in Indian stocks in the range of ₹1.5 lakh crore to ₹2 lakh crore over the next six months by funds unable to comply with the norms.
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The capital markets regulator, in its discussion paper on the topic, had estimated the assets under management (AUM) of «high-risk» foreign funds that must make additional disclosure at ₹2.6 lakh crore as on March 31, 2023.
The new regulations require such investment vehicles to provide granular details of all entities holding any ownership, economic interest, or exercising control. According to Sebi, foreign portfolio investors (FPIs) holding more than 50% of their Indian equity AUM in a single Indian corporate group and those holding more than ₹25,000 crore of equity AUM in the Indian markets must adhere to these norms. The rules were introduced in August 2023 in the wake of allegations of opacity in the ownership structure of overseas entities that were shareholders in Adani Group companies.
While Sebi has allowed a grace period for such funds to adhere to the rules, these entities will not be able to make fresh purchases of Indian stocks thereafter and can only trade on domestic stock exchanges to cut their holdings. Such FPIs must liquidate their holdings and surrender their Sebi registration within 180 calendar days.
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